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S. HRG. 109–1119 

REFORMING CORPORATE AVERAGE FUEL 

ECONOMY (CAFE) STANDARDS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SURFACE TRANSPORTATION 

AND MERCHANT MARINE 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

MAY 9, 2006 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

TED STEVENS, Alaska, Chairman 

JOHN MCCAIN, Arizona 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

DANIEL K. INOUYE, Hawaii, Co-Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

E. BENJAMIN NELSON, Nebraska 

MARK PRYOR, Arkansas 

LISA J. SUTHERLAND, Republican Staff Director 

CHRISTINE DRAGER KURTH, Republican Deputy Staff Director 

KENNETH R. NAHIGIAN, Republican Chief Counsel 

MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel 

SAMUEL E. WHITEHORN, Democratic Deputy Staff Director and General Counsel 

LILA HARPER HELMS, Democratic Policy Director 

SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT 

MARINE 

TRENT LOTT, Mississippi, Chairman 

TED STEVENS, Alaska 

JOHN MCCAIN, Arizona 

CONRAD BURNS, Montana 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

DAVID VITTER, Louisiana 

DANIEL K. INOUYE, Hawaii, Ranking 

JOHN D. ROCKEFELLER IV, West Virginia 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

E. BENJAMIN NELSON, Nebraska 

MARK PRYOR, Arkansas 

(III) 

C O N T E N T S 

Page 

Hearing held on May 9, 2006 ................................................................................. 1 

Statement of Senator Boxer .................................................................................... 16 

Article, dated February 2, 2002, from the National Journal, entitled 

Gas Mileage: Deal Maker or Breaker? by Margaret Kriz .......................... 18 

Statement of Senator Cantwell .............................................................................. 13 

Statement of Senator Dorgan ................................................................................. 25 

Statement of Senator Lautenberg .......................................................................... 9 

Statement of Senator Lott ...................................................................................... 1 

Prepared statement .......................................................................................... 1 

Statement of Senator Pryor .................................................................................... 21 

Statement of Senator Smith ................................................................................... 11 

Prepared statement .......................................................................................... 12 

Statement of Senator Snowe ................................................................................... 23 

WITNESSES

Cabaniss, Jr., John M., Director, Environment and Energy, Association of 

International Automobile Manufacturers, Inc. .................................................. 31 

Prepared statement .......................................................................................... 32 

Claybrook, Joan, President, Public Citizen ........................................................... 52 

Prepared statement .......................................................................................... 54 

Friedman, David, Research Director/Senior Engineer, Clean Vehicles Program, Union of Concerned Scientists ................................................................. 61 

Prepared statement .......................................................................................... 63 

Mineta, Hon. Norman Y., Secretary, Department of Transportation; accompanied by Jeffrey Rosen, General Counsel, USDOT, and Jacqueline Glassman, Deputy Administrator, NHTSA ................................................................. 2 

Prepared statement .......................................................................................... 5 

Letter, dated April 27, 2006, to Hon. Bill Frist ............................................. 3 

Reuther, Alan, Legislative Director, International Union, United Automobile, 

Aerospace and Agricultural Implement Workers of America (UAW) .............. 69 

Prepared statement .......................................................................................... 70 

Sharp, Hon. Philip R., President, Resources for the Future (RFF) ..................... 35 

Prepared statement .......................................................................................... 36 

Webber, Frederick L., President and CEO, Alliance of Automobile Manufacturers ..................................................................................................................... 27 

Prepared statement .......................................................................................... 28 

APPENDIX

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared statement ........... 85 

(1) 

REFORMING CORPORATE AVERAGE FUEL 

ECONOMY (CAFE) STANDARDS 

TUESDAY, MAY 9, 2006 

U.S. SENATE, 

SUBCOMMITTEE ON SURFACE TRANSPORTATION AND

MERCHANT MARINE

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:30 a.m. in room 

SD–562, Dirksen Senate Office Building, Hon. Trent Lott, 

Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF HON. TRENT LOTT, 

U.S. SENATOR FROM MISSISSIPPI 

Senator LOTT. The Committee will come to order. I’m pleased to 

convene this morning’s hearing on reforming Corporate Average 

Fuel Economy standards. Chairman Stevens had indicated that he 

would like the Subcommittee to go forward with this hearing despite the vote taking place on the floor a few moments ago. And 

I’m delighted that the Chairman is here, and that the other Senators are here, and some other Senators indicated to me, on the 

floor of the Senate, they’d be coming over momentarily. 

I do want to point out that we have many Senators that are 

going to be here this morning, a number of very good witnesses, including the Secretary of Transportation, our friend Norm Mineta. 

And I, therefore, ask that all opening statements be placed in the 

record at this point, and I’ll do the same myself and that we could 

go straight to the Secretary. 

[The prepared statement of Senator Lott follows:] 

PREPARED STATEMENT OF HON. TRENT LOTT, U.S. SENATOR FROM MISSISSIPPI

Since being introduced in the 1970s, Corporate Average Fuel Economy (CAFE) 

standards have been controversial. There has been much debate about their effectiveness and their effect on safety, consumer choice, and the automobile industry. 

CAFE became so controversial, that it effectively was frozen for many years. 

The stand-off over CAFE finally eased with Congress commissioning a National 

Academy of Sciences review of the CAFE program that was released in 2002. Although that study found that CAFE had in fact reduced energy consumption, the 

Academy was critical of how the program was structured and found that there was 

a negative impact on safety. 

Just this spring, the Department of Transportation issued new reformed CAFE 

rules for pickup trucks, vans, and SUVs. This rule is a radical departure from prior 

CAFE rules in that it applies different standards to different sized vehicles rather 

than a uniform standard across the whole fleet. The Department’s approach addresses many of the criticisms in the Academy’s study. 

2 

The recent rule did not, however, include new standards for cars. Those standards 

have been the same since 1984 and there is considerable legal ambiguity about the 

Secretary’s ability to increase the standards. It is clear that the law does not allow 

the Secretary to ‘‘reform’’ CAFE for cars, since that part of the statute is written 

differently. 

Secretary Mineta is here today to discuss his request that these legal impediments be removed and that the Secretary of Transportation be given the authority 

to ‘‘reform’’ CAFE for cars. 

I believe his request should be carefully considered. The Department has the technical and scientific expertise to develop a ‘‘reformed’’ standard for cars that carefully 

balances costs and benefits, including—importantly—safety. 

After this hearing, I hope to work with members of the Commerce Committee 

from both sides of the aisle, as well as with other Senators with an interest in this 

issue to see if there is enough common ground to develop a legislative proposal that 

can be enacted. I am afraid that if we get sucked into a debate about developing 

a single mileage standard, this process will very quickly get bogged down. We 

should do something constructive and update the existing cumbersome rule, which 

has not been changed since 1984, thereby doing away with the many worrisome attributes identified by the National Academy of Sciences. 

Senator LOTT. Mr. Chairman, would you be willing to go forward 

on that basis? 

The CHAIRMAN. That’s fine. 

Senator LOTT. If my colleagues would be willing to do that, we’ll 

include our statements in the record. 

Senator CANTWELL. Well, Mr. Chairman, I do think it’s an important hearing, and we’re glad that the Secretary of Transportation 

is here, and we look forward to his comments. I do have a statement, but happy to put that into the record and proceed with the 

hearing. 

Senator LOTT. Thank you very much, Senator Cantwell. 

Secretary Mineta, we’re delighted to have you back before the 

Committee, and we’re very anxious to hear your thoughts on this 

very important issue. Please proceed. 

STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY, 

DEPARTMENT OF TRANSPORTATION; ACCOMPANIED BY 

JEFFREY ROSEN, GENERAL COUNSEL, USDOT, AND 

JACQUELINE GLASSMAN, DEPUTY ADMINISTRATOR, NHTSA 

Secretary MINETA. Very well, thank you very much. Mr. Chairman and members of the Committee, thank you very, very much 

for the invitation to have this opportunity to discussing reforming 

Corporate Average Fuel Economy standards for passenger cars. 

Last week, at the President’s request, I sent a letter to Congressional leaders asking for the authority to reform the structure of 

the current CAFE program for passenger cars. And I ask, at this 

time, unanimous consent that my letter of April 27th to the majority leader be made a part of the hearing record. 

Senator LOTT. Without objection, it will be included in the record 

at this point. 

[The information previously referred to follows:] 

3 

U.S. DEPARTMENT OF TRANSPORTATION

Washington, DC, April 27, 2006 

Hon. BILL FRIST, 

Majority Leader, 

United States Senate, 

Washington, DC. 

Dear Bill: 

At the President’s request, I hereby ask that the Congress take prompt action to 

authorize the U.S. Department of Transportation (DOT) to reform fuel economy 

standards for passenger automobiles for the first time. Along with other previously 

announced energy policies, the President believes these actions are critical to promoting our Nation’s energy security and independence. 

The Administration has already shown strong leadership on fuel economy. The 

DOT raised the light truck and sport utility vehicle standards twice in the last four 

years, including a recently announced rulemaking that will save nearly 11 billion 

gallons of gasoline, eliminate incentives to make lighter and therefore more dangerous vehicles, and encourage all manufacturers, not just a few, to deploy fuel saving technologies. 

Our National Highway Traffic Safety Administration (NHTSA) has the technical 

expertise to regulate fuel economy in a manner that is cost effective, based on sound 

science and safeguards vehicle occupants. Substantial increases in CAFE standards 

under the current single standard approach would increase fatalities on America’s 

highways, raise healthcare costs and reduce employment. As a result, the Administration would oppose any increase in passenger car CAFE standards without corresponding reform. 

In addition, it is imperative that CAFE standards be set through an administrative process based on sound science and data. The administrative process provides 

safety and other public interest groups, the auto industry and the general public an 

opportunity to develop and provide NHTSA with policy suggestions and detailed 

technical, economic, and other relevant data necessary for reforming the passenger 

car CAFE system and setting new CAFE standards. 

I commend Congress for their strong interest in improving our country’s energy 

independence, and I look forward to working with you to achieve this important objective. 

An identical letter has been sent to the Minority Leader of the Senate, the Speaker of the House of Representatives, and the Minority Leader of the House of Representatives. 

Sincerely yours, 

NORMAN Y. MINETA, 

Secretary of Transportation. 

Secretary MINETA. Mr. Chairman, this is an important step toward reducing America’s oil demand as passengers account for 

some 43 percent of domestic oil consumption. Now, this Administration has a good record on improving CAFE. Members may recall 

that, in 2001, at my request, Congress ended the 6-year freeze on 

CAFE rulemaking. Later that year, the National Academy of 

Sciences issued a Congressionally-mandated study that was critical 

of the CAFE program. Among the report’s criticisms was that 

CAFE had probably cost between 1,300 and 2,600 lives in one year 

alone, 1993, because it encouraged automakers to build smaller vehicles. Paul Portney, the chair of the committee which wrote the 

landmark study, said, upon its release, ‘‘No matter what Congress 

decides regarding specific fuel economy targets, our committee is 

adamant that changes should be made to shore up the deficiencies 

in the program.’’ 

In response to this study, I directed NHTSA to begin reforming 

CAFE for light trucks. On March 29 of this year, we completed that 

reform by issuing a rulemaking that replaced the single fuel economy standard with an innovative size-based system. Allow me to 

4 

explain why basing a fuel economy standard on a vehicle’s size is 

superior to the current one-size-fits-all approach. 

First, a size-based system preserves vehicle choice. Instead of 

forcing manufacturers to produce smaller vehicles to comply with 

these regulations, this approach takes the automaker’s own product-mix projections and applies separate fuel economy targets to 

each vehicle based on its footprint. Under a size-based system, 

automakers will be able to build cars that consumers want to buy, 

but those cars will have to be more fuel efficient across the board. 

Second, a size-based system eliminates the incentive for automakers to produce smaller and, consequently, less safe vehicles by 

encouraging manufacturers to add fuel-saving technologies to boost 

fuel efficiency. 

Third, a sized-based system ensures that all automakers are encouraged to use fuel-saving technologies, not just the manufacturers of larger vehicles. 

Our new light-truck standards under the reformed CAFE will 

save a record 10.7 billion gallons of fuel. All told, the Administration has raised CAFE standards for light trucks for 7 consecutive 

years, from 2005 to 2011. Today, because of our successful reform 

of the light-truck CAFE program, we have the capacity to establish 

a far more precise, equitable, and safe CAFE program for passenger cars. However, we currently lack the legal authority to do 

so. The original CAFE standard for passenger cars was set at 27.5 

miles per gallon more than 30 years ago, back in 1975. Neither 

Congress nor the Department of Transportation has ever increased 

this standard beyond the level set in the original statute. 

So, it’s important that, if passenger car fuel economy standards 

are raised, that we make the necessary structural reforms to avoid 

compromising safety and causing job loss. If given the authority to 

reform CAFE for passenger cars, we will replace the one-size-fitsall system with a size-based system, as we did with light trucks. 

Based on the automaker’s confidential product plans, our experts 

at NHTSA can objectively measure how much fuel-saving technology we can require before the cost outweighs the benefit. 

Now, this method of formulating a fuel economy standard is 

science-based, subject to review, and is free from the deficiencies 

identified in the National Academy of Sciences study. It’s also far 

more likely to produce an optimal result than if Congress were to 

prescribe a standard in a statute. For this reason, we will not accept an arbitrary statutory increase under the current passenger 

car system. 

Mr. Chairman, the President does not ask for this authority 

lightly. And I am aware that certain automakers are having a 

rough time financially, and that thousands of hard-working Americans have lost their jobs as a result. But this Administration has 

also made great strides in improving fuel economy for light trucks 

without harming the economy or compromising safety. And so, I respectfully ask for the authority to achieve similar gains for the passenger car fleet. 

Mr. Chairman, I am ready to take questions. 

[The prepared statement of Secretary Mineta follows:] 

5 

PREPARED STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY, DEPARTMENT OF TRANSPORTATION

Mr. Chairman, thank you for inviting me to appear before this Committee today 

to discuss reforming corporate average fuel economy (CAFE) standards for passenger cars. 

On April 27, the President asked Congress for the authority to reform the structure of the current CAFE program for passenger cars for the first time in the program’s 30-year history. This is an important step to reduce America’s dependence 

on foreign oil, and is consistent with President Bush’s call to replace more than 5 

million barrels per day of oil imports by the year 2025. Currently, passenger cars 

account for 23 percent of domestic oil consumption. 

Mr. Chairman, this Administration has a good record on improving CAFE. Senators may recall that in 2001, at my request, Congress ended the six-year freeze 

on CAFE rulemaking. In 2002, the National Academy of Sciences (NAS) completed 

a study, at Congress’s request, that was highly critical of the current CAFE program. Among the criticisms contained in the NAS report was the contention that 

the CAFE program probably had cost between 1,300 and 2,600 lives in one calendar 

year alone (1993) because it encourages automakers to build smaller vehicles in 

order to ‘‘average out’’ fuel savings across their fleets. The chair of the committee 

wrote, ‘‘. . . no matter what Congress decides regarding specific fuel economy targets, our committee is adamant that changes should be made to shore up deficiencies in the program.’’ To correct these longstanding safety and other deficiencies 

in the CAFE program, I directed the National Highway Traffic Safety Administration (NHTSA) to begin reforming CAFE for light trucks based on the NAS recommendations. Unlike with passenger cars, the Administration does have the authority to reform CAFE for light trucks. 

On March 29 of this year, NHTSA completed its reform of CAFE for light trucks 

by replacing the one-size-fits-all system with an innovative size-based system. Allow 

me to explain why this reformed system that bases fuel economy standards on a 

vehicle’s size is superior to the current ‘‘one-size-fits-all’’ approach. 

• First, a size-based system preserves vehicle choice: Instead of forcing manufacturers to produce smaller vehicles for purposes of regulatory compliance, this 

approach takes the manufacturers’ own product mix projections and then applies separate fuel economy targets to each vehicle based on its dimensions. 

Under a size-based system, automakers will still be able to build the cars consumers want, but those cars will have to be more fuel efficient across the board. 

• Second, a size-based system eliminates the perverse incentives for manufacturers to produce smaller and more dangerous vehicles instead of introducing fuelsaving technologies. 

• Third, a size-based system ensures that all manufacturers are introducing fuelsaving technologies, not only the manufacturers of larger vehicles. 

Our new light truck standards will lead to a safer, more efficient CAFE program 

and will save a record 10.7 billion gallons of fuel. This rule also included large sport 

utility vehicles (SUVs), such as the Hummer H2, under CAFE for the first time. All 

told, this Administration will have raised CAFE standards for light trucks for seven 

consecutive years, from 2005 to 2011. 

Today, following our successful overhaul of the light truck CAFE program and 

consistent with the recommendations of the NAS, we have the capacity to establish 

a far more precise, efficient, and safe CAFE program for passenger cars, but we do 

not have the legal authority to do it. 

The passenger car fuel economy standard was set in law at 27.5 miles per gallon 

in the original 1975 CAFE statute. Some of the more senior Senators may recall 

that the 27.5 miles per gallon standard was arrived at by simply doubling what the 

average fuel economy was in 1975. The passenger car standard was not then, and 

certainly is not now, based on sound science or economics. 

The original statute did not authorize DOT to change the way the standard applied to different size cars. Neither Congress nor DOT has ever increased the passenger car standard beyond the level set in the original statute. So it is important 

that if we embark on this course, we do it right to avoid compromising safety and 

to avoid causing economic damage and job loss. 

If we are given the authority to reform the CAFE system for passenger cars, we 

can improve fuel efficiency by requiring manufacturers to apply fuel-saving technologies rather than giving them an incentive to build smaller cars. Based on the 

automakers’ confidential product plans, our experts at NHTSA can objectively measure how much fuel-saving technology we can require before the costs outweigh the 

benefits. This method of formulating a fuel economy standard is objective and subVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00009 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
6 

ject to review during the rulemaking process. It is also far more likely to produce 

an optimal result than if Congress were to prescribe a standard in a statute. 

The President and I are committed to improving fuel economy across the board 

through an open regulatory process built upon sound science and economics, but we 

will not accept an arbitrary statutory increase under the current passenger car system. 

Mr. Chairman, I know that whenever CAFE is debated, it can turn divisive. When 

the original CAFE statute was debated, I was a freshman Member of Congress. I 

recall well the debates of the 1970s on how best to conserve fuel and what the impacts would be on the economy. I remind Senators that CAFE reform will not be 

without cost. And I am aware that certain automakers are having a rough time financially, and that thousands of hard-working Americans have lost their jobs 

through no fault of their own because of these financial difficulties. 

Mr. Chairman, the President did not ask for this authority lightly. But this Administration has already made great strides in improving fuel economy for light 

trucks. We have the expertise and experience to boost fuel economy responsibly 

without needlessly sacrificing safety or American jobs. I now respectfully ask for the 

authority to achieve similar gains for the passenger car fleet. 

Senator LOTT. Well, thank you, Secretary Mineta. And to my 

Senate colleagues that are here, we’ll go ahead and have an opportunity to make a brief statement or ask questions of Secretary Mineta, and then we’ll go to the second panel. I would ask, though, 

that you be as brief as you can. 

Let me take the prerogative of the Chair just to ask the first 

question, then yield to the Chairman of the full Committee. 

In your letter to Congress and in your testimony here today, it’s 

clear that you not only want the authority to increase the CAFE 

standard, but the authority to reform it. What is it about the current system that makes you feel like we need to effectively start 

over and realign it—or reform it—for the passenger cars? 

Secretary MINETA. Well, typically, the stringency of the gas mileage efficiency standard is set at a certain amount. And when the 

manufacturers have that, they then, in order to meet that milesper-gallon standard, generally tend to lower the weight of the car 

in order to meet that fuel efficiency standard. And unfortunately, 

once you lower the weight of the car, then fatalities and serious injuries go up. 

We feel that we have to reform the performance standards—as 

we said in the light-truck rule—based on the footprint of the vehicle, that would be the width of the vehicle times the length of the 

wheelbase. 

Senator LOTT. It appears to me that you did a good job with the 

light trucks. Passenger vehicles are different, obviously, but based 

on your statement, you feel like you could come up with changes 

that will be as effective or as widely accepted as your light-truck 

decision? 

Secretary MINETA. Yes, sir, we believe so, because, under the 

law, there are four requirements that we have to look at. One is 

the maximum feasible fuel efficiency/economy, the need to conserve 

fuel, the requirement to save lives, and the fourth one, in terms of 

preserving jobs, or the impact on the auto manufacturers. 

Senator LOTT. You may not have the answer to this, because it’ll 

depend, I guess, on, you know, the process and getting the right 

result. How long, though, do you think this would take? 

Secretary MINETA. Well, there are two parts to that answer, Mr. 

Chairman. One is, we have to allow the manufacturers, under statute, 18 months lead time. The model year is generally October of 

7 

a given year. We have to give them 18 months. And so, that’s 

April—18 months ahead of that model year. 

Now, in order for us to come up with that study, in terms of what 

would be the fuel efficiency standard, I would assume that it would 

take a minimum of 1 year. So, even if we were to start today, we 

would have to have the rule out by April 1, 2007, in order to be 

able to impact on model year 2009. So, you’re talking at least 2- 

and-a-half years between the 18-month mandatory, under statute, 

plus at least 1 year for us to do our studies. I should have introduced the folks at the table with me. On my right is Jeff Rosen, 

our general counsel at the Department, and on my left is Jackie 

Glassman, our deputy administrator of NHTSA. 

Jackie? 

Ms. GLASSMAN. Yes, as the Secretary mentioned, it would take 

us about a year to collect the data from the manufacturers, go 

through that data, go through a rulemaking process, including notice, and then comment period and review of the comments, in 

order to put out a final rule applicable to passenger cars. So, in all 

likelihood, that would be model year 2010. 

Senator LOTT. Thank you all for being here. 

Mr. Chairman, would you like to go with your questions now, sir? 

The CHAIRMAN. I don’t quite get the 2010. I thought it was going 

to be 2009. 

Ms. GLASSMAN. If we could get a final rule out by April 1, 2007, 

then that could be applicable to model year 2009. Beginning now, 

in June of 2006, that would be a huge feat, to be able to get the 

product plans from the manufacturers, review them, put a notice 

out, give appropriate time for manufacturers and others with an interest—public-interest groups—to comment on the proposal, and 

come up with a final rule. 

The CHAIRMAN. Is the cost of change any part of a factor in these 

CAFE standards? 

Ms. GLASSMAN. Absolutely, sir. We look at the cost to change. We 

look at lead-time considerations. We look at the cost to the economy, the cost to jobs, the cost of lives, in terms of safety. We look 

at the Nation’s need to conserve energy. And we balance all of 

those factors to reach the maximum feasible level we can possibly 

set CAFE at, taking into account the fact that we do not want to 

cost lives and we do not want to cost jobs. 

The CHAIRMAN. And in terms of the light trucks, have you determined what the increase in cost to the consumer of the new trucks 

would be because of your regulations? 

Ms. GLASSMAN. Yes, sir. The total cost of our light-truck rule was 

about $6.7 billion. The cost to consumers, on average, was about 

$200 a vehicle. And the payback period, in terms of how long it 

would take people in the reduced cost of fueling up their vehicles, 

was about 4-and-a-half years. 

The CHAIRMAN. Is there any estimate on what the cost is going 

to be to the consumer, of compliance with the change in CAFE for 

passenger cars? 

Ms. GLASSMAN. No, sir, we haven’t done that analysis yet. That’s 

what we would have to do if we were given the authority to reform 

the program and raise the standards. 

8 

The CHAIRMAN. Do you have any standards that have been 

adopted in foreign countries that you look at as you go forward on 

these standards? 

Ms. GLASSMAN. We look at the product plans for the United 

States in a number of foreign countries—— 

The CHAIRMAN. No, I mean the standards, as far as construction 

and what will lead to the cost savings—I mean, the fuel savings 

in CAFE. 

Ms. GLASSMAN. There are a number of different approaches in 

different countries. In Europe, for example, they have 40 percent 

diesel vehicles. We don’t have that kind of penetration of diesels 

and hybrids yet in the United States. In China, they’re using a 

weight-based system. They have a very different kind of product 

mix. So, we really focus more on the products and consumer choices 

made in the United States. 

The CHAIRMAN. Are the CAFE standards affected by the use of 

ethanol? 

Ms. GLASSMAN. The CAFE standards themselves are not. That is 

in law. There is a credit given for the production of dual-fuel vehicles or vehicles that can run either on gasoline or ethanol. But, by 

law, NHTSA is not allowed to consider those credits when actually 

setting the CAFE standards. 

The CHAIRMAN. But will CAFE standards vary for those vehicles 

that are built to use a higher amount of ethanol? 

Ms. GLASSMAN. They don’t vary by vehicle. There’s one standard 

for a manufacturer’s entire fleet. But certainly the increased use of 

ethanol will increase fuel economy and help the overall balance of 

fuel economy in the United States. 

The CHAIRMAN. Well, we were told at another hearing that it is 

possible for the manufacturers to develop their motors so that they 

could use a higher degree of nonfossil fuels. Put it that way. Does 

that crank into your CAFE standards calculation? Am I clear on 

what I’m saying? 

Ms. GLASSMAN. It does if they’re being put into the manufacturer’s product plans. We look in the manufacturer’s product plans for 

whatever time period we’re looking at, which, for passenger cars, 

would be somewhere between 2009 or 2010 forward, for a few 

years, and if those kinds of vehicles are being put into the marketplace in that time frame, then, yes, we would absolutely be looking 

at them. 

The CHAIRMAN. Well, I was told if the Department recognized the 

change in the motors that could be made, in terms of CAFE standards, that a great deal of the savings we want to achieve could be 

done just by that alone. You’re looking at the overall construction 

of the vehicle, including the motor, isn’t that right? 

Ms. GLASSMAN. We are. We look at the overall construction of the 

vehicles. We look at safety and other emissions equipment to see 

how much weight that adds. When we’re setting CAFE standards 

themselves, we’re looking at more short-term gains from the standard setting. But CAFE itself is a long-term effort, as is the development of alternative fuel. 

The CHAIRMAN. But what I’m saying is, we were told we could 

move forward faster by just the motor’s change. Is that correct? 

9 

Ms. GLASSMAN. If the motors are—if those kinds of changes in 

the vehicles are being put into the product cycle, then we would see 

greater changes, faster. 

The CHAIRMAN. Thank you. 

Senator LOTT. Thank you, Mr. Chairman. 

Senator Lautenberg, I understand perhaps I was supposed to go 

to Senator Cantwell next, and I would be glad to recognize her 

if—— 

Senator CANTWELL. Well, Mr. Chairman, I understand that Senator Lautenberg showed up early to try to get on first for another 

obligation, so I’ll defer to him, and let him ask his questions. 

Senator LAUTENBERG. That’s very nice, but I’m not deferring to 

anybody else. 

[Laughter.] 

Senator LOTT. That was a—— 

Senator LAUTENBERG. Thanks, Mr. Chairman. 

Senator LOTT. Comedy is really good this morning. Thank you, 

Frank. Go ahead. 

[Laughter.] 

STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY 

Senator LAUTENBERG. So far, we’re doing pretty good, Mr. Chairman. And I thank you for calling this hearing. 

I listened very carefully to the Secretary and the plans that he’d 

like to see put into place, but I have a problem with some of the 

supporting view. The reason we’re doing this, I understand, is because we’ve got this enormous pressure now in the excessive fuel 

use at these ridiculous prices. I noted that some are concerned 

about the crash-worthiness of smaller cars, and that we might have 

increases in fatalities if we reform CAFE. I think the number was 

1,300 to 2,600 lives. But I would wager that the fact that we don’t 

fix our highway hazards, our bridge deterioration, and our behavioral problems like drunk driving—we don’t do the things that 

make the roads safer—causes death and injuries as well. I think 

people here are very well aware of my interest in drunk driving 

and how by simply raising the age for drinking legally we save a 

thousand lives a year. 

So, not to diminish the concern about the loss of life, I’d point 

out that alcohol-related fatalities increased 1.7 percent, from 

16,694 to 16,972. That’s over 1 year, from 2004 to 2005. And, 

frankly, I don’t buy the argument that the concern has got to be 

the fact that you run the risk. We don’t want to run risk with anybody, but what’s the risk that’s put upon this country by this incredible cost for fuel? The average family is going to spend $1,800 

a year more for fuel. And there are lots of people whose incomes 

aren’t 10 times or 15 times more than that. 

On a different note, Mr. Secretary, there’s something I’m concerned about. There are three seats remaining unfilled on the Amtrak board. If we could get people into trains—and we can do it if 

we improve the ride and the service—we know these seats can be 

occupied. The open seats are supposed to be filled with Democratic 

nominees. Will the Administration consult with the Senate Minority Leader to see that the President nominates members to fill 

10 

these seats? Let’s see if we can make some improvements there, 

even as—and I am pleased to see that there is an interest in increasing CAFE standards, but an increased passenger rail service 

is a place where we could really do something at the same time to 

reduce our dependence on foreign oil. 

Secretary MINETA. Well, we have consulted with the Minority 

Leader right now on a nominee for the board. And the name is 

pending, I believe, at the White House right now. 

Senator LAUTENBERG. There are three seats open, Mr. Secretary. 

Secretary MINETA. Yes, sir. 

Senator LAUTENBERG. But if you have one name—and this is not 

a new discussion, as you’re aware. So, I urge you to—let’s get on 

with fixing parts as we can—as quickly as we can. 

Early in the Administration, Vice President Cheney held private 

meetings with energy industry executives regarding policy in our 

country. Two-thirds of all of petroleum used in our country is for 

the transportation sector. Were you involved in these meetings 

when they took place, Mr. Secretary, with the senior executives 

from the oil companies and the officials from the Administration to 

try and develop that energy policy package that was passed here? 

Secretary MINETA. Yes. I was a member of that Energy Policy 

Task Force. I was not privileged to sit in on any of the meetings 

with the Vice President that you were referring to. 

Senator LAUTENBERG. How about meetings with oil industry executives? 

Secretary MINETA. None directly. 

Senator LAUTENBERG. You didn’t—— 

Secretary MINETA. I did not have any. 

Senator LAUTENBERG. Didn’t have any. As you all know, cars and 

trucks account for about 20 percent of the U.S. carbon dioxide 

emissions. Since the Administration won’t commit to increasing 

CAFE standards for passenger vehicles, and it’s alleged that that 

needs Congressional approval, how do we reduce the impact of 

global warming coming from cars, unless there is leadership from 

the Administration? 

Secretary MINETA. Well, we haven’t said that we would not raise 

the CAFE standard. What we’re saying is that the stringency of 

that CAFE standard alone is not going to fix the problem. And 

what I am asking for is the reform of the structure of the program. 

And I cannot restructure the program without the legal authority 

to do that. It’s not the stringency, it’s not the miles-per-gallon 

standard that—— 

Senator LAUTENBERG. Well, wouldn’t that matter substantially, 

Mr. Secretary? 

Secretary MINETA. No, my point is that just setting the milesper-gallon standard alone does not take into consideration the total 

picture that we have to look at under the law. Under the law, we 

have to look at maximum feasible fuel economy, the ability to save 

lives, the ability to conserve energy, and the ability to save jobs or 

the impact on the manufacturer. Now, those are the factors that we 

have to, under statute, look at in order to establish the miles per 

gallon. And so, that’s why we have to have the authority to reform 

the structure. We cannot just reform the structure administratively. 

11 

Senator LOTT. Thank you very much. 

Senator LAUTENBERG. Thank you. 

Senator LOTT. Senator Smith? 

STATEMENT OF HON. GORDON H. SMITH, 

U.S. SENATOR FROM OREGON 

Senator SMITH. Thank you, Mr. Chairman. And, Secretary Mineta, it’s nice to see you. Thank you for your service. 

It’s hard to believe, but I’ve been in this chamber now for 10 

years, and I have voted for CAFE standards, and I have voted 

against some that went, I thought, too high. I have always recognized, in voting for them, that this was a very blunt instrument to 

try and incentivize a good thing, which is fuel economy. I know 

Congress has always held onto this authority that you’re asking 

for, because the other competing values of jobs and safety really do 

require our attention, as well. We can’t just dismiss those in the 

name of fuel economy. But I’m also aware that other nations have 

tried programs, the fee-bate program that I think you’re asking for, 

something other than just a quota for so many vehicles to be sold 

at certain mileage levels. I understand Ontario, Canada, has such 

a fee-bate program. In other words, the heavier, less-efficient vehicles, they simply pay more; the lighter, more fuel efficient vehicles, 

they actually get rebates. Is that the program that you’re describing? 

Secretary MINETA. No. What we’re doing is really basing it on 

the size or the footprint of the vehicle, as we did with the light 

trucks, so that we have a continuous curve based on the size of the 

vehicle. And in order to do that kind of structural reform under the 

CAFE program, we need that authority in law, which I requested 

from Congress in 2001. 

Senator SMITH. And you feel it’s worked for light trucks. 

Secretary MINETA. It has, and that’s why we would like—because 

of the experience we’ve had with light trucks, we—— 

Senator SMITH. Has the light-truck approach been sufficient? Are 

we getting as much savings from it—in terms of fuel consumption—— 

Secretary MINETA. Well—— 

Senator SMITH.—as we could? 

Secretary MINETA.—we think that for the model years that we 

are now embarking under this new program—and it will be mandatory for the model year 2011—we feel that that is a good approach. 

Senator SMITH. The approach that you’re asking for, have any 

other nations tried it? And how has it worked for them? I know individual states have looked at such things, and that they have been 

discouraged from that, because of Federal pre-emption. 

Secretary MINETA. Let me ask Ms. Glassman that. 

Ms. GLASSMAN. As the Secretary indicated, the approach that 

we’re asking for is part and parcel of the current statutory structure, but it would allow us to go further than the limits that are 

imposed by the statute itself. Other countries have taken a number 

of different kinds of approaches. There are also a variety of ideas 

out there, market-based approaches, such as fee-bates that you 

mentioned. And we would look at a national fee-bate program, but 

we haven’t yet done that. 

12 

Senator SMITH. But you would do that if—— 

Ms. GLASSMAN. We would—— 

Senator SMITH.—we gave you that—— 

Ms. GLASSMAN. We would—— 

Senator SMITH.—authority? 

Ms. GLASSMAN.—study that. But that is a reform which is beyond the kind of reform that we’re specifically asking for today. 

Senator SMITH. Well, one of the problems we have here in giving 

you the authority is that this doesn’t break down in terms of Republican or Democrat. So it’s actually helpful, Mr. Secretary, that 

you’re a Democrat. I have noticed that there are two schools of 

thought on this. One’s all carrot, and the other’s all club. And 

somehow I think we’ve got to figure out how to balance the competing interests of fuel economy, jobs, and safety with some combination of incentives and regulation. The problem we have, it 

seems to me, in giving you this authority, is the fear of what the 

next Administration would do with this. There is a fear CAFE 

standards will be arbitrarily undertaken to do something that just 

simply is devastating to the auto industry or devastating to safety, 

all in the name of fuel efficiency. As a Democrat, sir, do you think 

that that’s probable? Are those fears unfounded? Should we trust 

the Executive Branch of government with what is a very, very important issue, on three counts? 

Secretary MINETA. I see no reason why that cannot be done, because Congress still has the oversight responsibility of what happens in law. And so, Congress still has the ability to change the 

law at that point, if it’s not working. And so, I see no problem with 

that approach at all. 

Senator SMITH. Thank you, Mr. Chairman. 

PREPARED STATEMENT OF HON. GORDON H. SMITH, U.S. SENATOR FROM OREGON

Mr. Chairman, I want to thank you for convening this hearing on automobile fuel 

efficiency. I look forward to hearing from the witnesses appearing before the Subcommittee today. 

Since Hurricane Katrina, we have had numerous hearings in various Senate committees about high gasoline prices. A few things have become quite evident over the 

last nine months, as prices have remained at historically high levels. First, the 

United States is heavily dependent on oil imports and we are now competing with 

emerging economies such as China and India for oil resources. Second, we rely on 

nations that are politically volatile, such as Venezuela, Nigeria, and Iran, for much 

of our imported oil. Third, our domestic production and refinery capacity are heavily 

concentrated in the Gulf of Mexico—an area prone to hurricanes. Fourth, as a Nation, we have made little progress in vehicle fuel efficiency while the population is 

increasing and the average American is driving more miles each year. 

Even Congress can’t repeal the laws of supply and demand. We know that most 

of our oil is used in the transportation sector, and that demand is increasing. We 

also know that supplies are fairly stagnant. Over 70 percent of current production 

comes from oil fields that have been in production for more than 30 years. There 

is currently less than two percent surplus production capacity globally. 

We know, intellectually, what it is going to take to solve our dependence on foreign oil. Numerous studies have told us that we need more efficient vehicles, and 

we need alternative fuels for those vehicles. There is widespread agreement that 

those are the two most important actions we could take. The challenge is that it 

requires some major changes to the entire sector—from design and manufacturing 

of vehicles to development of the infrastructure to support advanced technology vehicles. 

The United States is significantly more dependent on imported oil today than it 

was in 1973, when the oil embargo was imposed. Back in the 1970s, Congress recognized the importance of vehicle efficiency, and we adopted CAFE standards that 

13 

moved our vehicle fleet to significantly higher efficiency levels by 1990. Unfortunately, that is the last significant step we’ve taken. We’ve had numerous discussions 

since then, and while I haven’t been here for all those debates, I do recall the Senate floor debate in connection with trying to pass an energy bill in 2002. At that 

time, I had joined Senator Kerry and several colleagues in sponsoring an amendment to increase CAFE standards. Our amendment would have increased auto efficiency levels to an average of 36 miles per gallon by 2015. 

The amendment was ultimately withdrawn after arguments that mandating increased fuel efficiency levels would hurt our domestic auto industry, and that it 

would take choices away from Americans. Instead, we passed an amendment that 

asked the NHTSA to study CAFE standards to determine whether they should be 

increased. We failed to take action, in part, because gasoline was significantly less 

expensive in 2002 than it is today. 

Four years later, gasoline is over $3 a gallon and prices are expected to remain 

high into the foreseeable future. I want to focus briefly on where we are now. I have 

a chart here that compares auto efficiency levels for several countries. The message 

is clear. Of all nations around the world, we have—by far—the lowest auto efficiency levels. Our cars and light trucks have an average efficiency of less than 25 

miles per gallon, while China and Australia have average efficiencies above 30 miles 

per gallon, and both the European Union and Japan have average efficiencies above 

40 miles per gallon. What’s more, these other regions have policies in place that are 

expected to move their average efficiencies upward. Unless we also act, we’ll fall 

even farther behind. 

We declined to act in 2002 at least in part because it was argued that increasing 

CAFE would cost us jobs in our domestic auto industry. Well, inaction certainly 

didn’t help us on that front. Here’s a graph showing auto industry jobs since 1990. 

We’ve lost 215,000 jobs just since 2000, and more job losses in the domestic auto 

industry are projected for the next few years. I happen to believe that part of the 

reason for auto job losses today is because our manufacturers aren’t making the 

right vehicles. The global market is now demanding more efficient vehicles, and we 

don’t have them to sell. 

Let me make one final comparison. In 2002, we were spending $300 million per 

day on oil imports. Today that number is $800 million—almost $1billion per day— 

for the oil we’re importing. 

We can no longer afford the status quo. As a first step, I am working on a bill 

to encourage the investment in plants to manufacture more efficient, alternative vehicles, as well as the fueling and interconnection infrastructure that will be needed 

to provide alternative fuels and re-charge plug-in hybrid vehicles. This bill will also 

lift the cap on the number of alternative vehicles eligible for tax credits as requested 

by President Bush last week. My bill will also encourage such transportation alternatives as bicycling and telecommuting by providing favorable tax treatment related 

to the costs of those alternatives to commuting. 

While these tax measures will make a difference, we must do more to increase 

the efficiency of our highway fleets. We have several options. We could mandate 

higher efficiencies, higher CAFE levels. as we did in the 1970s. We should also 

study whether alternative regulatory structures would be more effective than the 

current CAFE system. Regulatory alternatives that have been discussed, and should 

be examined, include fuel efficiency standards based on vehicle weight classes or 

footprints, or a program that provides rebates on efficient vehicles and imposes fees 

on less efficient vehicles. 

The U.S. auto industry is at a crossroads: innovation or obsolescence. I believe 

that we can use technology and American ingenuity to create a new generation of 

advanced technology vehicles. We can, and we must, have vehicles that are more 

efficient, while preserving passenger safety features and customer choice. It is a tall 

order, but American industry is up to the challenge. 

Senator LOTT. Senator Cantwell? Thank you for your courtesy 

this morning, too. 

STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON 

Senator CANTWELL. Thank you, Mr. Chairman. 

Mr. Secretary, I believe you were in Congress in 1975, isn’t that 

correct? 

Secretary MINETA. I was. 

14 

Senator CANTWELL. That was your first term. And that’s the year 

that Congress passed an energy bill with a CAFE standard in it, 

which I think, at that time, proved to be one of the least controversial aspects of that bill when it passed. And the savings that we 

get today from that is nearly 3 million barrels per day, than we 

would have had if we had not passed that legislation. So, to me, 

it’s been a great success. 

Now, we’ve heard a lot about this light-truck—— 

Secretary MINETA. Senator Cantwell, could I comment on that 

just a minute? 

Senator CANTWELL. Yes—— 

Secretary MINETA. That’s all right. Go ahead. That’s all right. 

Senator CANTWELL. Let me—— 

Secretary MINETA. That’s all right. You go ahead. 

Senator CANTWELL. If I could, because we’re—— 

Secretary MINETA. Sure. 

Senator CANTWELL.—only on 5-minute rounds here. You’ve commented about the lightweight truck standards, and my colleagues 

have also commented on that. I guess I have a little bit different 

perspective, in that fact, you know, the establishment of the vehicle 

classes and the use of the footprint, rather than the weight, in the 

end result, to me, has been, I would say, anemic. The new rule covers 240,000 large SUVs, or 2.8 percent of the 8.5 million light 

trucks sold annually. In addition, the rule does not include trucks 

that weigh between 8,500 and 10,000 pounds, such as the Hummer 

H2—that is, until the 2011 date—and does not cover those that 

weigh over 10,000 pounds. So, although the impact analysis done 

by NHTSA found that the final rule for the light truck will save 

7.8 billion gallons of fuel, that’s the study, not the 10 billion gallons 

previously advertised. So, maybe you could comment on that. And, 

moreover, the analysis found that 2.9 billion gallons of the fuel savings would have come from changes that the automakers would 

have made to their fleet due to market forces anyway. So, that’s 

my reading and analysis of the lightweight truck scenario. 

So, now if we’re talking about restructuring, and we’re talking 

about a more aggressive ramp—because I would like you to—I 

would like you to say if the Administration plans on moving up the 

passenger car mileage standard from where it is today. There has 

been several proposals here in the Senate to move passenger cars 

up to 40, and I don’t know whether the Administration supports 

that or not—and trucks up to 27. But what would be the—how 

could we be assured that the Administration would have an aggressive ramp-up, given the international situation that we’re facing, 

given the economic situation that we’re facing? And how would you 

characterize that bold step today? How would you measure that, as 

a bold step? 

Secretary MINETA. Well, I think, first of all, what we did in the 

light-truck rule was a bold step, in terms of where we were previously, and we feel that the way we’ve formed the program, and 

the results, is a bold step forward. Remember, for some 6 or 7 

years, Congress had a prohibition of our even dealing with the 

whole light-truck rule at all. And that’s why I requested in 2001— 

in July of 2001, requested that I be given the authority to deal with 

light trucks. In December 2001, Congress gave us the authority to 

15 

do that. So, with that experience from the light truck, I feel we can 

do the same thing as it relates to passenger cars. 

Now, you mentioned the 10.7 billion gallons of gas that we say 

that we will save from the light-truck rule, and that is the 7.8 billion that we compute from our own rule, as well as the 2.9 billion 

which the auto manufacturers are incorporating into their light 

trucks, minivans, and SUVs because of the rulemaking. And so, 

that’s why we claim the 10.7 billion total gallons. 

But, again, I feel that we can use the experience that we have 

gained in the light-truck rule to do the same thing in terms of the 

private passenger—— 

Senator CANTWELL. So, in levels of boldness—if I could, in levels 

of boldness, you’re saying that the Administration’s policies would 

be similar to what they’ve done in lightweight trucks. 

Secretary MINETA. I think that what we have done in light 

trucks was a bold move. Again, it’s not just a question of establishing or determining what the level might be. Forty miles per gallon may not be a level that is attainable without losing jobs, impacting on the manufacturing capability, and—even though we can 

conserve fuel—and it does give us a high standard. But, again, we 

are obligated to look at four factors. And someone just picking out 

of the air a figure—and we feel that what we do is based on science 

and economic data and the projection of the fleet from the manufacturers. 

Senator CANTWELL. Do you—given that the Administration—I 

know my time is up, but if I could just—— 

Senator LOTT. All right. 

Senator CANTWELL.—one more follow-up. I know that various 

Members of the Cabinet have now called this an ‘‘energy crisis.’’ 

And, given the fact that they have called it a ‘‘crisis,’’ do you think 

maybe a different, or a bolder approach, given that you’re saying 

you have various categories, is for the Administration to set an actual goal savings by barrels of oil? 

Secretary MINETA. Well—— 

Senator CANTWELL. Because if we look at CAFE, and we say that 

we’ve saved, you know, 3 million barrels per day, maybe a different 

approach would be for the Administration to say, ‘‘Here’s how much 

they want to save,’’ given—and given the last energy bill in which 

they opposed even a 1 million barrel oil savings a day, maybe the 

Administration could better convey their boldness by setting a goal 

for this particular reduction in consumption. 

Secretary MINETA. Well, I think the reference to the ‘‘energy crisis’’ was attributed to, as I recall, Secretary Bodman. But when you 

look at the President’s response, it’s really a four-point program 

that he has that is short-term, mid-term, and long-term. I don’t believe the Administration—And I know I have not—advocated that 

the CAFE is a short-term response to the energy crisis. This is 

really a long-term response, in terms of the energy crisis. This is 

not a response to $3.50 at the pump, because this will not deal 

with $3.50 at the pump immediately. But it will impact on—in 

terms of fuel savings over a long period of time, and in terms of 

one segment of the energy consuming part of the economy, the 

automobile. 

Senator CANTWELL. Thank you, Mr. Secretary. 

16 

Senator LOTT. Thank you, Mr. Secretary. 

Senator Boxer? 

STATEMENT OF HON. BARBARA BOXER, 

U.S. SENATOR FROM CALIFORNIA 

Senator BOXER. Thank you. And welcome, everybody. 

I wanted to thank Senator Cantwell for her line of questioning, 

because I know she’s very expert in this area, and, you know, her 

probing you on the boldness of your move is something that I think 

a lot of Americans share. They can’t believe that you’re calling it 

a bold move to go to the light trucks and say there’s going to be 

fuel economy increase by 1.8 miles per gallon over 4 years, when 

everyone knows the technology is so far ahead of you. And I think 

one of the reasons we’re all suffering here from low ratings in the 

Congress and in this Administration, abysmal ratings, is because 

people are smart, and they see what they’re paying, and they know 

we’ve done nothing. And now you’re asking us for more authority. 

So—what? You can do 1.8 miles per gallon over 6 years? Four 

years? And I have to say, when I look at what you use for your 

cost-benefit ratio, it’s amazing, you left out the entire area of greenhouse gases, and didn’t even put it in as a benefit, what we could 

benefit from. You say we pull a number out of the air? Well, you 

ignored the air, even though you were told to take a look at it. You 

had people who wrote you and said, ‘‘It’s very important to include 

the benefits on air quality,’’ and that those benefits could be as 

great as $50 billion by 2020, yet those benefits were ignored in 

NHTSA’s final rule—in effect, really putting a thumb on the scale 

on the side of lower standards. 

So, the other thing is, you’ve got the price of oil fluctuating. It’s 

a moving target. Now, when you came up with this, what was the 

price of oil then, when you came up with your 1.8 improvement? 

What was the price of oil then? 

Secretary MINETA. I would assume it was about $1.80. 

Senator BOXER. All right. So, now you have a situation where the 

cost—— 

Secretary MINETA. I—— 

Senator BOXER.—is so much—— 

Secretary MINETA. I don’t recall the exact time, but—Jackie, 

maybe—— 

Ms. GLASSMAN. When we do the rulemaking, we use the longterm price of oil that is put out by the Department of Energy’s—— 

Senator BOXER. And what was it? 

Ms. GLASSMAN.—EIA. For the—— 

Senator BOXER. What was it? 

Ms. GLASSMAN.—NPRM, it was $1.58. For the final rule, it went 

up to $2. And they are looking at the price of oil over the long 

term—— 

Senator BOXER. All right. Well—— 

Ms. GLASSMAN.—and not at—— 

Senator BOXER.—may I say—— 

Ms. GLASSMAN.—today. 

Senator BOXER.—something here? This proves the point, that, 

you know, you relied on information that has proven to be false. 

You should go back—based on the price of oil. I don’t think anyVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00020 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
17 

one’s saying, now, that the price of gas at the pump is going to go 

to $1.50. If you can find someone, that would be swell. Now, maybe 

there are people out there. But, if anything, we’re looking at higher 

prices. So, you should go back with this abysmal—— 

Secretary MINETA. Senator, I think—— 

Senator BOXER.—increase. 

Secretary MINETA. But, Senator, if I might say, what we do is 

like taking a picture at a certain point, and we take a picture, and 

that camera reflects what is being taken at the time. And so, at 

the time—— 

Senator BOXER. Fine, then take another picture. Throw out the 

camera, get a new one, go get a picture. Go take a picture of the 

oil prices and the—— 

Secretary MINETA. Senator—— 

Senator BOXER.—gas prices in California—some stations, 4 bucks 

a gallon—— 

Secretary MINETA. I—— 

Senator BOXER.—and then make a case for a 1.8 abysmal increase in fuel economy over 4 years. It just doesn’t fly with the 

American people. They’re smarter than that, Norm. 

Secretary MINETA. I understand that, Senator. But under the 

rules, we have to give notice to the manufacturers 18 months 

ahead of the model year, so—— 

Senator BOXER. Ah, I—— 

Secretary MINETA.—I understand that great—— 

Senator BOXER. Well, go back— 

Secretary MINETA.—prices have gone up to $3.57, whatever they 

are today. But—— 

Senator BOXER. I need to take back my time—— 

Secretary MINETA. Absolutely. 

Senator BOXER.—because I don’t have much. And I’m trying to 

make the point here that, as Maria Cantwell said, we’re in a crisis. 

Your own Administration says that. This is not the time for business as usual. You might have to go back. Whoa, what a shock. 

You might have to go back. There is a crisis. You’ve come up with 

a number here that makes no sense. You’ve ignored the new technologies. I mean, you think you’re bold? Then I’m sure you think 

that Ford, which is producing SUVs—part of the—light truck category, that get 36 miles per gallon, they’re revolutionary. You are 

so far behind on what’s even happening in the marketplace. 

And I guess my question is—you’re asking us to give you authority. You know what? If you had fought with us for better fuel economy, I’d have a different attitude about it, because I’m a little annoyed at this Congress. Democrats and Republicans haven’t risen 

to the occasion on this. But where were you when various members 

of both parties had legislation? Olympia Snowe is one of them. 

Were you helping her? Were you helping us to get better fuel economy into the law? Did the Administration take a position on that 

when we were fighting to get higher fuel standards? Where were 

you? 

Secretary MINETA. No, I’m sorry, I’m not familiar with the legislation. But we have not taken a position on other legislation that 

I can think of— 

18 

Senator BOXER. Well, if I might say, that’s incorrect, according 

to this article. And you might want to debate it. And I will close 

with this and ask unanimous consent to put into the record this 

article from the National Journal, February 2, 2002, the time when 

colleagues—we were all working hard to get better fuel economy, 

‘‘The President has consistently opposed increasing fuel economy 

standards for cars and SUVs. His national energy strategy, which 

was released in May, largely adopted in the House, pushes for 

greater oil and gas drilling that would provide few incentives for 

energy conservation.’’ 

[The information previously referred to follows:] 

The National Journal, February 2, 2002 

GAS MILEAGE: DEAL MAKER OR BREAKER? 

By Margaret Kriz 

Fifteen hundred members of the United Auto Workers descended on Washington 

this week for their union’s annual legislative conference, thereby allowing the UAW 

to mount a massive in-person lobbying campaign aimed at persuading the Senate 

to protect the interests of U.S. automakers. As UAW members were swarming Capitol Hill, the majority staff of the Senate Commerce, Science, and Transportation 

Committee was attempting to hammer out an energy bill toughening fuel-efficiency 

standards for cars and SUVs. 

The UAW fears that stiffening those requirements, formally known as corporate 

average fuel economy (CAFE) standards, would overburden U.S. car manufacturers 

who are already feeling the pinch of the national economic downturn. Ford Motor 

Co., for example, recently announced plans to lay off 35,000 workers and close five 

plants. 

But the recession is not the only issue reshaping the energy debate, which shifted 

to the Senate after the House passed an energy bill last year. Environmental lobbyists say that national security fears triggered by September 11 are causing more 

lawmakers to look for ways to cut oil imports from the Middle East and other unstable regions. Even some Republicans who have long opposed toughening CAFE standards are considering that approach as a way to curb American gasoline consumption. U.S. oil imports ‘‘aren’t just looked at as a vulnerability anymore,’’ said David 

Hamilton, director of state and Federal policy at the Alliance to Save Energy. ‘‘Now 

they’re a national threat.’’ 

At the same time, however, the energy debate has taken on strong new political 

overtones because Sen. John F. Kerry, D–Mass., who is a potential Democratic presidential contender, is forcefully attacking President Bush’s pro-industry energy policies. Senate Majority Leader Thomas A. Daschle, D–S.D., is also trying to play the 

energy card against Bush. 

The President has consistently opposed increasing fuel-economy standards for cars 

and SUVs. His national energy strategy, which was released in May and largely 

adopted by the House in August, pushes for greater oil and gas drilling and would 

provide few incentives for energy conservation. The House rejected higher CAFE 

standards. But many lobbyists and Congressional staff members say that White 

House control over the energy debate has been undercut by Enron Corp.’s growing 

financial problems and by the public’s growing concerns about allegations that Vice 

President Dick Cheney allowed Enron and other energy industry giants to essentially dictate much of the Administration’s energy strategy. In Congress, committee 

investigations into Enron’s collapse have eaten up staff time and forced the Senate 

Commerce Committee to postpone a hearing on CAFE standards. 

Despite growing support across party lines in the Senate for stricter efficiency 

standards, continued opposition by the auto industry and its Congressional supporters significantly reduces the odds that Congress will actually pass an energy 

package this year. Citing the CAFE dispute and standoffs over several other energy 

proposals, many industry lobbyists and Capitol Hill staffers give the legislation only 

a 50–50 chance of making it to the President’s desk. 

Environmentalists predict that opponents of higher CAFE standards are likely to 

try to block Senate passage by filibustering. Conservative Republican opponents of 

efficiency standards know they can count on the votes of Democratic Senators from 

Michigan and other Midwestern states where cars and car parts are manufactured. 

19 

Meanwhile, filibuster threats are also looming over the Republican proposal to 

allow drilling in Alaska’s Arctic National Wildlife Refuge. Senators Kerry and Joe 

Lieberman, D–Conn., have vowed to block any energy bill that includes drilling 

there. Sen. Ted Stevens, R–Alaska, counters that he will filibuster any bill that 

doesn’t allow drilling in the refuge. 

Even if the Senate passes legislation that includes increased CAFE standards but 

bars drilling in the Alaska refuge, the energy package would face tough going in 

a House-Senate conference committee. After all, the House energy package excludes 

fuel-efficiency standards and gives a green light to the Alaskan drilling provision. 

‘‘You’d have a very round peg coming out of the Senate trying to fit into a very 

square hole in the House,’’ said Daniel F. Becker, director of the Sierra Club’s global-warming and energy program. ‘‘It would be a real challenge to make the two fit.’’ 

Currently, automakers are required to meet an average efficiency standard of 27.5 

miles per gallon for all the new cars they sell in the United States and 20.7 mpg 

for light trucks. The latter category includes SUVs, which now constitute half of the 

passenger vehicles sold in the United States. U.S. auto companies regularly fail to 

meet the CAFE standards, while American Honda Motor Co. and Toyota Motor Co. 

usually exceed the fuel mandates because they sell mostly small cars and are already using more efficient technologies. Because of opposition from Detroit, CAFE 

standard haven’t been increased since the 1980s. 

Lobbyists close to the Senate Commerce Committee’s negotiations say that Democrats recently floated the idea of raising fuel-efficiency standards to between 30 mpg 

and 39 mpg over a 10- to 12-year span. A July 2001 National Academy of Sciences 

report said such increases are feasible using existing technology. 

The Committee’s present draft rejects a UAW fuel-efficiency plan under which all 

car makers would be required to increase their fleet’s efficiency by the same percentage. That approach was opposed by committee Republicans as unfair to Honda 

and Toyota, which already exceed current CAFE requirements. 

The UAW argues that Congress should give more weight to the needs of the U.S. 

car companies, which employ UAW members, than to those of Honda and Toyota, 

which run non-union shops. ‘‘It’s important that these standards are economically 

feasible. And by that we mean something that doesn’t cause economic hardship,’’ 

said Alan Reuther, Legislative Director of the UAW. 

Honda favors an across-the-board increase in the CAFE standards. Ford, General 

Motors Corp., DaimlerChrysler Corp., and Toyota are part of an industry alliance 

that opposes any increase in the fuel-efficiency standards. The U.S. automakers assert that instead of hiking CAFE standards, which would force car companies to invest more in modernizing the current generation of internal combustion engines, 

Congress should fund more-futuristic research projects, such as the Bush Administration’s hydrogen-powered fuel-cell car project, which was announced by Energy 

Secretary Spencer Abraham in early January at the Detroit auto show. But the industry’s critics argue that although fuel cells may have long-term promise, they can 

do nothing to immediately lessen the Nation’s growing appetite for oil. 

The Big Three U.S. automakers now argue that fuel standards should be set by 

the Transportation Department’s National Highway Traffic Safety Administration. 

However, during the Clinton Administration, they successfully lobbied Congress to 

block funding that would have allowed the NHTSA to draft new efficiency standards. 

Under Bush, NHTSA has been reluctant to crack down on the auto industry. The 

Administration recently announced that it would not raise the fuel-efficiency requirements for SUVs and other light trucks built in 2004. But Administration officials have hinted that they might be willing to raise the standards for those made 

in 2005. 

Meanwhile, other Administration officials—notably John Graham, who heads the 

Office of Management and Budget’s powerful Office of Information and Regulatory 

Affairs—have suggested overhauling the CAFE standards to allow automakers to 

trade fuel-efficiency ‘‘credits,’’ a controversial move that would require Congressional 

approval. 

Energy legislation became a top priority for Washington early in Bush’s first year, 

when he called for a national energy strategy to help solve California’s electricity 

crisis. Cheney’s energy task force developed a largely supply-side national energy 

strategy, which recommended increasing U.S. oil and natural-gas drilling throughout the United States, including in the Alaska wildlife refuge. The measure rejected 

tougher CAFE standards but called for more reliance on nuclear power. In August, 

the Republican-controlled House adopted the Administration’s energy package and 

added $34 billion in tax benefits—$27 billion for the coal, oil, natural gas, and nuclear power industries, and the other $7 billion earmarked for energy-efficiency and 

conservation programs. 

20 

The Democratic-controlled Senate has started from scratch in developing its national energy strategy. Released on December 5 by Daschle and Senate Energy and 

Natural Resources Committee Chairman Jeff Bingaman, D–NM, that bill would provide incentives for building a natural-gas pipeline from northern Alaska to the lower 

48 states but would not allow oil development in the Alaskan wildlife refuge. It 

would give the Federal Energy Regulatory Commission more power to streamline 

state electricity deregulation and would push the White House to develop a plan for 

curbing emissions of the greenhouse gases linked to global warming. 

Daschle has promised to bring energy legislation to the Senate floor before the 

Senate break that begins on February 18. (The CAFE provision, however, is being 

handled separately by the Senate Commerce Committee and will be added to the 

Daschle package.) Daschle’s bill would also include tax breaks for industry but 

would provide more funds than the House wants for alternative energy and energyefficiency projects. The Daschle tax breaks would likely total $10 billion to $15 billion. Like the CAFE provision, the tax breaks are set to be added to the energy 

package on the Senate floor. 

Supporters of the fuel-efficiency standards argue that increasing them is one of 

the only ways of reducing U.S. gasoline use. ‘‘CAFE has been the single most effective energy policy this Nation has ever had in saving gasoline,’’ said Hal Harvey, 

president of the Energy Foundation, which supports renewable energy projects. 

‘‘There is literally no other policy that the United States can enact that would have 

remotely the same impact as CAFE in the next decade or two, except possibly 

[steep] European-level gasoline taxes. And the political prospects of a gas tax are 

zero.’’ 

The prospects of ratcheting up CAFE standards this year are not zero. In fact, 

they are rising, but still are not high. 

Secretary MINETA. Well, then, you know, on that count, let me 

say that in 2001, I wrote a letter to Congress asking to be given 

the authority to raise the fuel standards. 

Senator BOXER. That’s not my question. My question—— 

Secretary MINETA. You’re asking—— 

Senator BOXER.—is, Did you—— 

Secretary MINETA.—whether or not—— 

Senator BOXER. No. I said, Did you help us or hurt us when we, 

in the Congress, were trying to raise fuel economy standards? Did 

you weigh in on the side of those of us who were in favor of the 

legislation? The— 

Secretary MINETA. At the—— 

Senator BOXER.—answer is no. 

Secretary MINETA.—at the time, I did not. 

Senator BOXER. You did not. You opposed it. Not you, personally— 

Secretary MINETA. I didn’t oppose it. 

Senator BOXER. The President—— 

Secretary MINETA. I did—— 

Senator BOXER.—opposed it. 

Secretary MINETA.—not oppose it. 

Senator BOXER. I’m not talking about you. 

Secretary MINETA. No, you asked me if I did. 

Senator BOXER. The Administration. I’m meaning the Administration, not you, personally. According to this article, the President 

consistently opposed it. 

Secretary MINETA. I think on a single-number basis, we have always, I guess, opposed. 

Senator BOXER. Thank you. 

Thank you, Mr. Chairman. 

Senator LOTT. On our early bird rule, I believe, Senator Pryor, 

you would go next, and then Senator Snowe. 

21 

So, Senator Pryor? 

Senator PRYOR. Mr. Chairman, I think that Senator Snowe was 

here before me. Senator Snowe, weren’t you here? 

Senator SNOWE. Go ahead. 

Senator PRYOR. Are you sure? OK. 

STATEMENT OF HON. MARK PRYOR, 

U.S. SENATOR FROM ARKANSAS 

Senator PRYOR. Thank you, Mr. Chairman. 

Let me ask, if I may, Mr. Secretary—I know that some of the 

studies that we’re looking at now, they’ve talked about recalculating CAFE. I think CAFE’s been around since 1975. Some of 

these studies that we’re referring to in this hearing and in other 

contexts are—go back to 2002, 4 years ago. Why are we just now 

coming to the point of you coming in and asking for a change of 

approach with CAFE? 

Secretary MINETA. Well, what prompted this latest round is Senator Frist’s bill—I believe it was introduced a week ago last 

Wednesday—requesting—or authorizing me to go ahead and increase the CAFE standard. And my response, when he dropped 

that bill in, was to say that I would want to have not only the authority to raise the CAFE standard, but to reform the structure of 

the program—— 

Senator PRYOR. OK. Let me ask—— 

Secretary MINETA.—for private passenger cars. 

Senator PRYOR. Right. Let me ask, on that, if I may, so I can be 

very clear on this and make sure I completely understand this. 

What you’re asking for us to do is to give the Administration, the 

Department of Transportation, total discretion in rewriting the 

CAFE standards and the goals and the targets? Is that what you’re 

asking for? 

Secretary MINETA. Well, it would still be subject to review. 

Senator PRYOR. Review by? 

Secretary MINETA. The Congress. 

Senator PRYOR. OK. 

Secretary MINETA. And, again, it would go through our normal 

rulemaking process, which would make it available for comment 

by—— 

Senator PRYOR. The public—— 

Secretary MINETA.—the public. 

Senator PRYOR.—whoever that may be. But you do want total 

discretion, in effect. You want discretion in order to rework CAFE 

the way you want to do it. 

Secretary MINETA. I—yes, I would say total discretion. But, 

that’s still subject to review. 

Senator PRYOR. What about if Congress had a requirement in 

there that actually, as you promulgate new CAFE standards, that 

you actually increase it by a minimum amount? I mean, let’s just 

pick a—figure out there—1 mile per gallon per vehicle, or something minimum in every category. Would that be something you’d 

object to? 

Secretary MINETA. Well, I suppose it would depend upon what 

the standard would be. If it were 1 mile per gallon, I would not 

have any objections to it. I think if I were given the authority to 

22 

revise it with the requirement that it be set at 40 miles per gallon, 

I think—because, again, you know, we’re guided by what is in statute and by the National Academy of Sciences. 

Senator PRYOR. All right, let me ask—— 

Secretary MINETA. So—— 

Senator PRYOR. I don’t want to interrupt—— 

Secretary MINETA. Yes. 

Senator PRYOR.—but my time is short, so let me ask this. As I 

understand it, you’ve recently gone through, with light trucks, a 

new series of CAFE standards. And something you have there now 

is—I believe you called it a few moments ago—the continuous 

curve. So basically, it’s a continuum of standards, depending on the 

vehicle, and it’s very specific to width and length of the vehicle, the 

size of the vehicle, et cetera. And is that what you want to do for 

cars? Is that what you have in mind for passenger cars? 

Secretary MINETA. That’s correct. 

Senator PRYOR. Would it be—— 

Secretary MINETA. Let me—— 

Senator PRYOR.—would it be very, very similar to the light 

trucks, maybe even identical to the approach you took in light 

trucks? 

Secretary MINETA. I think it would be, but let me have Ms. 

Glassman expand on the answer. 

Ms. GLASSMAN. Yes, sir, as the Secretary indicated, that would 

definitely be the starting point for the analysis. The idea would be 

to take our light-truck structure, apply it to passenger car data, 

and make sure that it applies appropriately to passenger cars, and 

make sure that we don’t create any unintended consequences by 

doing that. But it would be, definitely, the starting point. 

Senator PRYOR. OK. In regard to the light trucks, I know you 

talk about this continuous curve—how often will DOT or NHTSA— 

how often will you revisit recalibrating those standards? Do you do 

it annually, every 2 years, every 5 years? How often do you revisit 

those standards? 

Secretary MINETA. For the present light-truck rule, we go out to 

2011—I mean 20-—— 

Ms. GLASSMAN. Eleven. 

Secretary MINETA.—2011. So—— 

Senator PRYOR. Right. I understand that. But then, are you now 

starting the process again to go out beyond 2011, or to maybe even 

making some adjustment in 2010, 2011, you know, and that kind 

of thing? 

Secretary MINETA. I don’t believe we are. But let me ask Ms. 

Glassman—— 

Ms. GLASSMAN. Not—— 

Secretary MINETA.—whether—— 

Ms. GLASSMAN.—historically, CAFE standards were set annually. 

Beginning in 2003, we started to set standards in 3-year timeframes. So, we put out a rule in 2003 for light trucks applicable 

to model years 2005, 2006, and 2007. And in this latest rule, we 

approached 4 years. We would need a rule out, by 2010, beginning 

to cover 2012, and, in all likelihood, that would again be a multiyear rule. 

Senator PRYOR. Mr. Chairman, I’m out of time. Thank you. 

23 

Senator LOTT. Senator Snowe? 

STATEMENT OF HON. OLYMPIA J. SNOWE, 

U.S. SENATOR FROM MAINE 

Senator SNOWE. Thank you, Mr. Chairman. And thank you for 

holding this hearing on this critically important topic. 

And I want to welcome you, Mr. Secretary. Obviously, I think 

you sense a great deal of frustration, because we’re at a point 

where we cannot grapple with this issue in an aggressive way. I 

think America can do better than what we’re doing right now in 

fuel economy standards. It’s one that we have struggled with. 

Frankly, Congress hasn’t been any better on this issue than the 

Administration. But we’re at a point in this country where we really have to recognize that we have to address an increase in CAFE 

standards very vigorously and aggressively. 

Frankly, an unfortunate minimalist approach has been embraced. I believe that just increasing the light truck category by a 

little more than a mile per gallon—for SUVs, for instance—is insufficient to where we stand in America today. We’re depending on the 

most volatile regions of the world for our gasoline for the vehicles 

we drive. And other countries are ahead of us on establishing increases for greater fuel economies. 

So, I just don’t see why there is resistance and reluctance. I 

mean, the National Academy of Sciences, back in 2001, issued a report and said we could increase 15 miles per gallon in 15 years. 

And here we are today talking about how the Administration has 

done it once for the light-truck category, by increasing CAFE by a 

little more than a mile for the first time since 1985. For passenger 

cars, we haven’t had any changes since 1975. So, there really 

hasn’t been any effort to do that even though we recognize there 

are problems with a stagnant CAFE system. But shouldn’t we be 

able to know now, with specificity, where we should go on this 

issue? Senator Boxer mentioned the initiatives that we have fought 

for. And, once again, I’ll be introducing legislation with Senator 

Feinstein on this issue, creating a 10 in 10 bill—an increase of 10 

miles in 10 years for the overall average for the fleet, including 

passenger cars, light trucks, and SUVs. This is something we ought 

to be able to do. We ought to be inventive. We’re at a point in time 

where we have arrived at a real juncture. And I think it requires 

leadership on both of our parts, the Administration, as well as the 

U.S. Congress, in achieving that. We should go hand in hand. 

There should be no question about that. 

I am concerned because I think the real issue here is that we’re 

going to relinquish this authority, and in return, we’re just going 

to get a minimal approach rather than a very aggressive one. We 

need to be far more far-reaching in increasing CAFE standards 

than we are today. 

We’re not hearing any time lines from your DOT. We’re not hearing how much the Administration wants to increase standards. 

We’re not hearing anything. And here we are in the midst of an 

energy crisis, frankly. This is certainly abundantly clear. And we 

don’t know what’s ahead of us in the months to come. We’re back 

to the heating oil costs concerns from last January in considering 

24 

the winter months to come. The prospects don’t look very bright at 

this point and I have great concerns. 

So, we ought to be doing all we can about oil savings and reduced 

costs. And I don’t hear that we are. And that’s the issue. We could 

really fix this. We have the technology. We have the wherewithal. 

We have the knowhow. It will require leadership, including the 

White House and here in the U.S. Congress to get it done. And 

that’s why I am reluctant to abdicate the authority for CAFE 

standards for passenger cars, because I don’t think increases are 

going to happen. Look at where we stand today. NHTSA has increased CAFE for SUVs a little more than one mile per gallon, so 

if we give NHTSA authority over passenger cars as well, we totally 

transfer—we relinquish that authority, so then where are we? 

Secretary MINETA. Well, first of all, there’s no question that 

there’s an urgency about the issue. I guess my problem is that establishing the CAFE standard is really part of the long-term issue 

involving fuel. It doesn’t have an immediate impact on the price of 

gasoline at the pump. Fuel efficiency will be able to conserve fuel, 

but it’s not one that, again, impacts on fuel costs or conservation 

immediately. It’s one that has impact over time. As I said, the urgency is there to get it done, but, in terms of its impact, will not 

be immediate. 

Now, in terms of the stringency of the standard, again, I guess 

we’re really being driven by the statutory requirements, in terms 

of impact, again, on safety, jobs—and so, that’s why to me, it’s 

much more difficult than to just establish some mile-per-gallon 

standard and set that as a goal to attain without going through the 

studies that NHTSA has to go through in order to come to that conclusion. I just feel that we have to allow the comment period, to 

be able to allow NHTSA the ability to take into consideration product mix, impact on safety, the ability to conserve fuel, and to save 

lives. 

Senator SNOWE. Well, a lot of the issues that you raise have been 

issues ever thus. I mean, it’s always been that way. It’s always 

been the case. And I can’t believe, in America today, in the 21st 

century, that we cannot reconcile ourselves as to what the solutions 

are. The National Academy of Sciences said it back in 2001, and 

we know we have the capabilities to address all these competing 

interests for these issues. And, frankly, we know there will be no 

immediate impact on the price of gasoline. But, I hesitate to even 

think about where we would be today if we had begun to implement a very aggressive schedule for CAFE increases back in 2001. 

I guess the point here is that it would send a very strong message, and particularly to the transportation sector that has imposed 

tremendous demands on our consumption of imported oil. That is 

a huge issue, and that’s what we need to address effectively. 

Secretary MINETA. And probably the two questions I ask are, 

one, relating to stringency, and the other in terms of timing. And, 

again, in terms of timing, we’re constricted by law. The law says 

we have to give at least 18 months notice to the manufacturers. 

But for us to give notice to the manufacturers, it takes us about 

a minimum of a year. And as Jackie has indicated, a minimum, 

they’d be hardpressed to come up with a major rule on CAFE 

standards. 

25 

Senator SNOWE. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary. 

Senator LOTT. All right. 

Senator Dorgan, if you’d bear with us just 1 second, we do have 

a very good panel that we want to hear from this morning, but 

Senator Boxer had one last question would like—— 

Senator BOXER. Yes. 

Senator LOTT. OK, would you like to do that right quick now, 

and then we’ll go to Senator Dorgan? All right, good. 

Senator BOXER. Mr. Secretary, the Federal Government purchases 58,000 new vehicles for the Federal fleet every year. Would 

you support a piece of legislation that says they should buy, where 

feasible and where it makes sense, the most fuel-efficient vehicles 

they can, to set a standard for the rest of the country? Would you 

support that concept? As an individual. 

Secretary MINETA. Yes. 

Senator BOXER. I know you can’t—— 

Secretary MINETA. Yes. 

Senator BOXER.—you have to check with the other people, but 

I’m asking you, personally, if that would make sense to you. 

Secretary MINETA. Sure, that sounds—— 

Senator BOXER. Good. Well, I have such a bill. So, I’ll be calling 

you. 

[Laughter.] 

Senator BOXER. And the only other point I’d make is, I’d say, go 

back and redo your cost-benefit ratio, because it’s way off the mark. 

Gas is higher. We can give tax breaks to people who buy these fuelefficient cars. And you should include the greenhouse gas benefits 

from a better fuel economy. 

Thank you. 

Senator LOTT. Senator Dorgan, would you like to make a 

brief—— 

Senator DORGAN. Well, Mr.—— 

Senator LOTT.—statement or—— 

STATEMENT OF HON. BYRON L. DORGAN, 

U.S. SENATOR FROM NORTH DAKOTA 

Senator DORGAN.—Mr. Chairman, first let me apologize. I 

know—I’ve been elsewhere, and I’ve been delayed. I don’t want to 

take much time. But let me just, if I might, so that you can get 

the second panel up, ask just one or two questions of Secretary Mineta. 

I have not been a big fan of CAFE standards. I’ve always said, 

if the issue on energy is the debate between CAFE and ANWR, we 

lose, because we have to be bolder and much more decisive on a 

range of issues—hydrogen fuel cells in the future, and so on. But 

I—you know, I looked at a car the other day that was 10 years 

newer—a new car—than the previous same model, and exactly the 

same rated mileage. I mean, it, on the sticker, said—you know, you 

get the same mileage. Now, the question is, Why, in 10 years, has 

nothing changed with respect to that car? I don’t understand it. So, 

I’ve—my own view is, I don’t think Congress has much choice but 

to be much bolder, much more aggressive on CAFE standards and 

other issues. 

26 

And I guess my question for you is, we’ve had a number of 

iterations—I think Senator Cantwell probably asked about this—of 

how many barrels of oil we’re going to save by a certain time to 

establish goals. You know, there’s this old saying, ‘‘If you don’t care 

where you are, you’re never going to be lost.’’ So, you set a goal. 

And if you set a goal, then you aspire to reach that goal. What is 

your goal? What is our goal? What’s the Administration’s goal at 

this point with respect to efficiency of the vehicle fleet? What is the 

goal? Do we have a goal? 

Secretary MINETA. I’m not sure that I can give you an answer 

in terms of miles per gallon. 

Senator DORGAN. Well, then savings—saving the number of barrels of oil by a certain time. 

Secretary MINETA. Well, we don’t start with, let’s say, saving 3 

million barrels a day, and then come up with the miles per gallon, 

because, again, in terms of determining what the miles per gallon 

should be under CAFE, we look at the product mix of what the 

manufacturers will be building in a given model year. And maybe 

I can’t explain it as well, but maybe I can have Ms. Glassman explain it in terms of the process we go through. As I said, if someone 

were to say, ‘‘We’ve just come up with a rule that comes over 37 

miles per gallon,’’ to me that would be ready, fire, aim—— 

Senator DORGAN. Yes, but— 

Secretary MINETA.—because I can’t come to a conclusion first on 

the miles per gallon or the fuel saved prior to making the determination through the computations of a rulemaking as to what the 

miles per gallon would be. 

Senator DORGAN. But, Mr. Secretary, that reminds me of a 

bumper sticker, ‘‘Onward through the fog.’’ You know, the fog here 

is the uncertainty of what our goal is. It seems—I just disagree 

completely with the notion that you can’t set a goal and then manage, with respect to policy, public policy, to how you achieve that 

goal, whether it’s incentives, whether it’s mandates, whether—no 

matter what it is. You’ve got to have a goal. You’ve got to aspire 

to be someplace. And the question I’m asking is, What’s the goal 

with respect to vehicle efficiency? And the reason I ask this question, Mr. Chairman—as I understand it, the Chinese now have 

about 20 million cars. By the year 2020, they’re going to have 120 

million vehicles. So, we’re going to add 100 million vehicles to the 

vehicle fleet, just with China alone. And we suck 84 million barrels 

out of this planet every day. We use one-fourth of it in this country. 

We’ve got huge problems. And I’m just trying to figure out, What’s 

our goal? And the reason I use vehicles as the catalyst here is, my 

first car was a 1924 Model T Ford that I rehabilitated and sold 

when I was a little kid. I put gas in the 1924 Model T exactly the 

same way I put gasoline in a 2006 Ford. Nothing has changed. Everything else about the car has changed, but you still stick the hose 

in the tank, and you’re still pumping petroleum. And I know you 

can’t give me the answer at the moment, but I’m telling you, I 

think the Administration, and I think the Congress, has to set 

goals, establish goals, then develop the policy to meet those goals. 

Senator LOTT. Well, thank you very much, Senator Dorgan. 

Thank you, Secretary Mineta. 

27 

We’ve got a very good panel now. We’d like to ask this panel to 

take their seats as quickly as possible. It includes Fred Webber, 

President, Alliance of Automobile Manufacturers, of Washington, 

D.C.; Mr. John Cabaniss, Director of Environment and Energy, Association of International Automobile Manufacturers, from Arlington; the Honorable Philip R. Sharp, former colleague from the 

House of Representatives, now President, Resources for the Future; 

Ms. Joan Claybrook, President, Public Citizen, Washington, D.C.; 

Mr. David Friedman, Senior Analyst, Clean Vehicle Program, 

Union of Concerned Scientists, of Washington, D.C.; and Mr. Alan 

Reuther, Legislative Director, International Union, United Automobile, Aerospace, and Agriculture Implement Workers of America. 

I’d like to ask this panel, if you would submit your full statement 

for the record. It will be included in its entirety. Then if you could 

sum up your statement, hopefully limiting it to 3 minutes—Senators, we couldn’t do that, probably, but we’d ask you to challenge 

yourself to try to keep it as brief as possible, because we do have 

an excellent panel. We’d like to get your basic point of view and 

have a little time left for, hopefully, some questions and attempted 

answers. 

Senator DORGAN. Mr. Chairman, can I have my opening statement put in the record? 

Senator LOTT. Your statement will be included in the record at 

the beginning of the hearing. 

Mr. Webber, let’s begin with you. 

STATEMENT OF FREDERICK L. WEBBER, PRESIDENT AND CEO, 

ALLIANCE OF AUTOMOBILE MANUFACTURERS 

Mr. WEBBER. Well, thank you, Mr. Chairman. Good morning. 

Thank you for giving me this opportunity—push it again. How is 

that working? OK. 

Senator LOTT. Pull it up a little closer, Fred. 

Mr. WEBBER. Thanks. 

As you know, we represent—the Alliance represents nine automobile manufacturers. We share the concerns of this panel, of our 

customers, of the Congress, writ large, about gasoline prices, certainly energy security, and we all need to take steps together to 

solve the problem, to solve the challenge. 

There’s a great story out there in America today that’s not being 

told, and we’re going to start telling it ourselves, and that has to 

do with advanced technology. I know the focus is on CAFE and the 

authority the Secretary’s looking for to apply the truck rule to 

automobiles. But, as he said, it’s not a quick fix. It’s not going to 

solve the immediate problem or the immediate challenge. It’s a 

long, laborious process. It takes time. 

In the meantime, this exciting industry that I represent is moving rapidly toward advanced technology vehicles. We have over 40 

in the marketplace today. We’re going to have another 40 in the 

next year or so. And what’s happened here is that, like safety—as 

you know, when safety became a competitive issue, all kinds of 

great things happened in the automobile industry, and today you 

and I drive trucks and cars that have never been safer. That’s 

what’s happening in the advanced technology arena. Advanced 

technology has become a competitive issue, and we’re off to the 

28 

races. And our member companies and others are really striving 

hard to develop these advanced technology vehicles. We’ve made a 

lot of progress with E–85 engines that’ll burn ethanol. We’ve made 

a tremendous amount of progress with diesel, clean diesel, biodiesel. We are looking down the road at hydrogen. We’ve got the 

Administration’s support on that, and the Congress’s support on 

that. This is the real story. 

This is going to be the fix. This is going to enable us to reduce 

consumption of gasoline from foreign sources, or, I should say, oil. 

We’re very excited about it. We’re moving forthrightly. And we 

would ask that people recognize it, especially the Congress. 

I want to say one other thing. In our car lots today we have over 

100 different models of vehicles that get over 30 miles to the gallon. The consumer has a choice. That’s been the objective all along 

in the history of the automobile industry. Soon the consumer will 

have greater choices as we move forward with advanced technology. I know many of you have interest in ethanol. We’ve got infrastructure challenges there, but I think they can be overcome. 

So, again, this is an exciting time for our industry, perhaps a 

turning point, and we are going to continue the progress that we’ve 

made. 

[The prepared statement of Mr. Webber follows:] 

PREPARED STATEMENT OF FREDERICK L. WEBBER, PRESIDENT AND CEO, 

ALLIANCE OF AUTOMOBILE MANUFACTURERS

The Alliance of Automobile Manufacturers (Alliance) is a trade association of nine 

car and light truck manufacturers including BMW Group, DaimlerChrysler, Ford 

Motor Company, General Motors, Mazda, Mitsubishi Motors, Porsche, Toyota and 

Volkswagen. One out of every ten jobs in the U.S. is dependent on the automotive 

industry. 

Alliance members share the concerns of our customers and the American public 

about high gasoline prices and support the President’s policy of reducing our consumption of petroleum. Member companies have consistently improved the fuel efficiency of their products and continue to offer ever-increasing numbers of advanced 

technology vehicles—such as hybrids, clean diesels, alternative fuel vehicles, and 

others—that reduce the automotive sector’s consumption of petroleum. 

For example, since the 1970s, new vehicles have continued to become more fuelefficient. EPA data demonstrate that fuel efficiency has increased steadily at nearly 

one to two percent per year on average from 1975 for both cars and light trucks. 

Passenger car fuel economy has more than doubled from 14.2 mpg in 1974 to 29.1 

mpg in 2004 and light truck fuel economy has increased by 60 percent since 1974. 

But as we have noted on many previous occasions, the ultimate decisions about 

what vehicles are purchased and how they are driven belong to American consumers. 

And while consumers value fuel economy, they also want many other attributes 

in today’s vehicles, such as safety, passenger and cargo room, performance, towing 

and hauling capacity. Our challenge is to develop advanced technology vehicles that 

combine these attributes with improved fuel efficiency. Of particular focus is maintaining safety while improving fuel efficiency. 

The auto industry leads the way when it comes to investing in research and development. Automakers are committed to being first to market with breakthrough technologies that can produce new generations of autos with advanced powertrains and 

fuels. Automakers are competing to bring these vehicles to market, as soon as the 

technology is feasible, affordable and meets consumer expectations. Each year many 

new advanced technology models are offered on dealer lots. In just five years, the 

Alliance has seen the number of these vehicles grow to more than 40 models on sale 

in dealer showrooms with an additional 35 models, that includes hybrids, clean diesels and alternative fuel vehicles in showrooms soon. In addition, vehicles using liquid hydrogen in internal combustion engines (ICE), fuel cells and electric vehicles 

are in development. Today, eight million advanced technology and alternative-fuel 

autos are on the road and automakers will continue to increase volumes and new 

29 

product offerings for years to come. This year more than one million advanced technology and flexible fuel vehicles will be sold. Automakers support incentives that 

can help put more of these highly fuel-efficient autos on the road. 

The result of all of this work is that today’s drivers are learning a new vocabulary. The following is a brief description of some of the exciting advanced technologies and alternative fuel vehicles being sold or currently in development. 

Flexible Fuel Vehicles 

An important provision of the Energy Policy Act of 2005 (EPACT 2005) is the increased promotion of renewable fuels in the transportation sector. Since 1996, auto 

manufacturers have been producing vehicles capable of using high concentration 

blends of ethanol including E–85. There will be more than six million of these E– 

85 capable vehicles on the road by the end of the year and nearly one million more 

are being added each year. If fuel were available for all of these E–85 capable vehicles to refuel using only E–85, the U.S. would be able to reduce its gasoline consumption by nearly three billion gallons per year. 

EPACT 2005 will help in E–85 infrastructure development by raising the requirement for the use of ethanol and other renewable fuels to 7.5 billion gallons per year 

by 2012 and providing tax incentives aimed at making more E–85 pumps available 

to the driving public and helping to reduce reliance on oil imports. 

Hybrid-Electric Vehicles 

Hybrid-electric vehicles are being offered today and are already saving fuel. The 

number of these vehicles will increase substantially over the next several years. 

They offer significant improvements in fuel economy—up to 50 percent and reduced 

emissions. These vehicles utilize electric motors for propulsion, to reduce some of the 

burdens on the traditional ICE. Hybrid-Electrics capture usable energy through regenerative braking. It is estimated that by 2010, more than 50 hybrid nameplates 

will be available in North America with volumes approaching one million vehicles. 

Hybrid technology can also be applied to diesels, alternative fuel and fuel cell vehicles. 

Advanced Lean-Burn Engines 

Vehicles that are powered by clean advanced lean-burn technology such as lean 

burn gasoline engines and direct injection diesels offer greater fuel economy and 

better performance than conventional gasoline-powered engines. Diesel-powered vehicles are very popular in Europe—where environmental standards and economic 

incentives have been provided to enhance their appeal. These types of vehicles could 

provide fuel economy gains of up to 30 percent compared to conventional vehicles. 

In addition, most diesels are capable of running on good quality biodiesel blends of 

up to five percent (B5) and many are designed to use up to twenty percent or one 

hundred percent biodiesel fuel (B20 or B100). 

Fuel Cells 

From a vehicle perspective, hydrogen-powered fuel cells offer the greatest potential improvement in fuel efficiency and emissions reductions. They also create a 

great opportunity for eliminating dependency on petroleum. However, widespread 

commercialization of this technology is some years away. 

Hydrogen Internal Combustion Engines 

Another promising and enabling technology is hydrogen-powered ICEs. The concept of using hydrogen ICEs offers several advantages: near-zero emissions, maintaining the utility, flexibility, and driving dynamic of today’s automobile, assisting 

in the development of hydrogen storage technology, and developing hydrogen distribution channels and helping to promote hydrogen refueling infrastructure. 

All of these advanced technologies and alternative fuel vehicles will help the U.S. 

address concerns about its over-reliance on imported oil. But they will take time to 

be effective. Tomorrow’s transportation needs will be met by a diverse collection of 

technologies each offering drivers a unique set of attributes to help move their families down the road. 

For its part, the auto industry is committed to advancing the state of technology 

and bringing new vehicles using these technologies to the market as quickly as possible. Competition among automakers will drive this process far better and with 

fewer disruptions to the marketplace than any regulations that can be adopted. Furthermore, stimulating consumer demand can help accelerate this process. Tax credit 

provisions enacted as part of EPACT 2005 have helped to spur the purchase of these 

highly fuel-efficient vehicles. 

Today, automakers are providing consumers with a wide range of fuel-efficient 

choices, but when gasoline prices rise, not all consumers are in a position to purVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00033 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
30 

chase the highly fuel-efficient models on sale today. There are over 200 million vehicles on U.S. roads, and the quickest way to reduce gasoline usage is through conservation. There are many simple, easy gas-saving tips for consumers. American 

drivers can save gasoline immediately by keeping their engines tuned and their 

tires properly inflated. Smooth accelerations save gas, along with closing windows 

at higher speeds. The U.S. Department of Energy provides excellent gas-saving tips 

to drivers, and we urge the government to highlight this information as the summer 

driving season begins. In addition, there are opportunities for infrastructure improvement such as improved traffic light timing that can help reduce fuel consumption. 

Corporate Average Fuel Economy (CAFE) 

For over 30 years, the CAFE program has been in place to provide fuel economy 

requirements as to what each automaker’s fleet of passenger cars and light trucks 

must achieve. While vehicle fuel-efficiency has improved, vehicles miles traveled has 

increased an average of about 1.7 percent per year for the past 30 years with a net 

result of little impact on energy conservation. Currently, CAFE requires each automaker to meet an average fuel economy level of 27.5 mpg for all new passenger cars 

that it sells each year. For light trucks, NHTSA recently announced an increase in 

the CAFE standards for the 2008–2011 model years, marking seven straight years 

of fuel economy increases (from MYs 2005–2011) and an increase of nearly 20 percent over that period. Meeting these higher fuel economy standards will be a challenge, even with all the new fuel-efficient technologies that manufacturers are placing in vehicles today. 

When setting new standards, NHTSA must consider many elements including 

technological feasibility, economic practicability, the need of the U.S. to conserve energy and the effect of other motor vehicle standards, such as safety and emissions 

on fuel economy. It is in the best interest of the public that we maintain a balance 

between improved fuel economy, highway safety and employment. 

While the law holds manufacturers responsible for meeting CAFE standards, it 

is important to recognize that in reality, consumer purchases actually determine 

whether a manufacturer meets, exceeds, or falls short of the standards in any given 

year. Because of this, CAFE compliance depends not only on what products are offered but also on what products consumers purchase. 

Proposed Changes in the Law 

The Administration has requested new authority to permit reform of the passenger car CAFE program. With the ink barely dry on the recent light truck rule 

and no actual experience with the truck reform proposal, it may be a bit premature 

to think of locking in this new system for passenger cars at this time. Inclusion of 

some broad guidance that CAFE reform, based on use of vehicle attributes and 

classes, may be of some value to the agency when it does consider increasing passenger car CAFE requirements. 

The Alliance also believes that NHTSA should very carefully weigh the timing of 

any increases in passenger car standards in view of the current economic health of 

the industry. No one likes high gas prices, but increasing passenger car standards— 

which takes time to effect and then years to fully become phased into the overall 

fleet of vehicles on the road—should not be viewed as a panacea to combat rising 

fuel costs. Alliance members are only in the second year of seven years of increasingly stringent light truck standards. In addition, the passenger car fleet average 

already exceeds the current 27.5 mpg standard—driven by consumer choices of the 

many very fuel-efficient cars offered for sale. 

If NHTSA is granted authority to reform the structure of the passenger car standards, the agency should administer the new authority in a nondiscriminatory manner among manufacturers. 

The rulemaking for CAFE standards is a labor-intensive and resource-intensive 

process both for NHTSA and for the manufacturers. Therefore, NHTSA should have 

the authority to establish a standard that could remain in effect for more than one 

year, as long as the agency determined by rulemaking that the standard is ‘‘maximum feasible’’ for that multiyear period covered by the standard. 

The discussion of passenger car CAFE policy has also raised two additional 

issues—credit trading and the so-called, two-fleet rule. Credit trading is intended 

to provide flexibility options for manufacturers as they pursue compliance with the 

CAFE program. Credit trading has been examined numerous times in the past without agreement as to its actual value. Department of Transportation recently considered adding credit trading to the light truck rule and decided not to do it. 

As regards to the two-fleet rule, the CAFE statute requires separation of the domestically-manufactured and non-domestically-manufactured vehicles in the pasVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
31 

senger car fleet, with separate compliance required by each sub-fleet. The original 

policy justification for the two-fleet rule was to discourage manufacturers from shifting their production of smaller, more fuel efficient cars to foreign factories. Recognizing that a fleet-wide average structure for the fuel economy standards would effectively require manufacturers to include smaller, more fuel-efficient cars in their 

fleets, Congress wanted to avoid any inducement to increase the importation of foreign-produced cars. If there are any proposed changes to the two-fleet rule they 

should be carefully reviewed. 

Conclusion 

We believe the most effective approach to pursuing reductions in U.S. gasoline 

consumption is to expand the availability of alternative fuels such as ethanol and 

to help promote the sale of advanced technology and alternative fuel vehicles that 

are currently gaining traction in the market. 

As previously stated, Alliance members are currently offering for sale more than 

one million of these advanced technology and alternative fuel autos, and more will 

be offered in the future. We are pleased that Congress passed consumer tax incentives for the purchase of some of these vehicles last year, and we urge Congress to 

focus on expanding the production, infrastructure and distribution network for alternative fuels. Getting more of the American-based renewable and biofuels into the 

market and available to consumers will displace much more gasoline than a new 

passenger car CAFE requirement. 

However, if NHTSA does initiate a passenger car rulemaking, the Alliance and 

its members will work closely with the agency in its consideration and promulgation 

of a final rule. Setting CAFE standards is a complicated, rigorous and arduous process. NHTSA considered over 45,000 comments and spent countless man-years in the 

consideration of its light truck rule. 

The automakers remain committed to populating America’s roadways with the 

latest innovative vehicle technologies. Competition among the companies will drive 

much of this innovation. And the changing needs and wants of American consumers 

also play a huge role in driving automaker decisions. 

Senator LOTT. Thank you very much, Mr. Webber. 

Mr. Cabaniss? 

STATEMENT OF JOHN M. CABANISS, JR., DIRECTOR, 

ENVIRONMENT AND ENERGY, ASSOCIATION OF 

INTERNATIONAL AUTOMOBILE MANUFACTURERS, INC. 

Mr. CABANISS. Good morning, Mr. Chairman. 

I represent the Association of International Automobile Manufacturers. We have 14 automakers that account for over 40 percent of 

the cars sold here in the United States every year. We support Secretary Mineta’s request for authority to restructure the program. 

We also stress the importance of providing adequate lead time to 

comply with the standards, encourage additional market-based incentives to spur the demand for those vehicles, and, also, the elimination of the so-called two-fleet rule. 

Senator LOTT. Do you want to pull that microphone a little closer, please. 

Mr. CABANISS. Certainly. Sorry. 

Senator LOTT. The elimination of? 

Mr. CABANISS. The two-fleet rule. 

We believe there are three guiding principles that Congress 

should follow when it addresses CAFE. First and foremost, any approach must be competitively neutral. Second, the requirements 

must be technologically feasible and economically practical. And, 

third, we need that lead time that I mentioned. 

Standards also should continue to be performance-based, not trying to pick winners and losers, and not specifying or favoring certain technologies over others. And those kinds of performance 

standards also allow manufacturers the flexibility that they need 

32 

1 AIAM members include Aston Martin, Ferrari, Honda, Hyundai, Isuzu, Kia, Maserati, 

Mitsubishi, Nissan, Peugeot, Renault, Subaru, Suzuki and Toyota. AIAM also represents original equipment suppliers and other automotive-related trade associations. 

to set their own research priorities, build on their strengths, and 

develop the products that meet consumer needs and demands. 

We support DOT’s request to move ahead, as they have already 

with the light trucks, to consider an attribute-based-type program. 

The light truck rule, as Secretary Mineta mentioned, is a good 

starting point. But we believe that, given that we don’t have experience with that program yet, we would urge some caution be taken 

there, in terms of carefully looking at how it applies. But under no 

circumstances should DOT rely on using a company-specific uniform-percentage increase-type approach. 

We believe that the incentives are very important, in terms of 

not just requiring that the vehicles be manufactured, but also creating extra demands for consumers to purchase them. Congress, of 

course, has considered various types of incentives in the past, and 

we support those, and we support working with you to develop 

even further ways to increase demand for these vehicles. 

The auto industry is not the same today as it was 30 years ago. 

Since the time when the CAFE program was first established, the 

AIAM companies, our companies, have invested over $30 billion in 

U.S.-based manufacturing plants and research facilities. Combined, 

the international automobile manufacturers employ over 100,000 

Americans and generate almost 2 million jobs in supplier and dealership facilities. And 60 percent of the cars and trucks that our 

members sell here in the United States are now manufactured 

right here in the United States. So, when we consider jobs, we need 

to consider the full landscape of the industry. 

Thank you. 

[The prepared statement of Mr. Cabaniss follows:] 

PREPARED STATEMENT OF JOHN M. CABANISS, JR., DIRECTOR, ENVIRONMENT AND

ENERGY, ASSOCIATION OF INTERNATIONAL AUTOMOBILE MANUFACTURERS, INC. 

Good morning. My name is John Cabaniss, Director, Environment and Energy for 

the Association of International Automobile Manufacturers, Inc. (AIAM). 

AIAM is a trade association representing 14 international motor vehicle manufacturers accounting for over 40 percent of passenger cars and over 20 percent of light 

trucks sold in the United States annually.1 AIAM appreciates the opportunity to 

offer its views regarding the need to reform passenger automobile CAFE standards. 

AIAM supports Transportation Secretary Mineta’s request for additional legal authority to revise the structure of the passenger car CAFE standards. In addition to 

addressing this issue, we would like to stress the importance of adequate lead-time 

in achieving compliance with any new standards, suggest that supplemental market-based incentives would strengthen a national effort to reduce fuel consumption, 

and recommend the elimination of the ‘‘two-fleet rule’’ requiring the separation of 

a manufacturer’s import and domestic fleets. 

AIAM members are important stakeholders in the debate over passenger car fuel 

economy standards, representing 44 percent of all sales in this market segment last 

year. In addition, AIAM member companies have for many years been leaders in 

offering fuel-efficient vehicles for the U.S. market. Historically, vehicles produced by 

our member companies have headed EPA’s annual list of most fuel-efficient vehicles. 

Member companies have achieved this fuel-economy leadership to a significant degree by pioneering the introduction of advanced automotive technology into their vehicles. Our member companies continue to introduce a variety of advanced technology models, including hybrid electric vehicles, ethanol-capable flexible-fuel vehicles, hydrogen fuel cells, clean diesel, as well as advances in traditional gasoline vehicles. 

33 

2See http://www.whitehouse.gov/news/releases/2006/04/20060428-9.html. 3 ‘‘Effectiveness and Impact of Corporate Average Fuel Economy Standards,’’ National Research Council, 2002, pages 92–93. 

AIAM believes that there are three guiding principles that Congress should follow 

when it addresses CAFE matters. First and foremost, when considering the form of 

the CAFE standards it is of the utmost importance that the structure or underlying 

approach is competitively neutral, and that all manufacturers are treated fairly and 

equitably under the standards system. Second, under any structure, the specific requirements of the standards must be technologically feasible and economically practicable. Third, it is absolutely essential that manufacturers are provided adequate 

lead-time to implement new standards. 

In addition, standards should continue to establish performance requirements 

rather than specify or favor any particular technology. Reducing U.S. dependence 

on petroleum is a complex undertaking, and the greater the number of creative technologies that can be brought to bear, the better. In addition, performance standards 

allow manufacturers the flexibility to set their own research priorities based on 

their individual strengths and to develop the most effective and efficient approaches 

to meet consumer demand, while achieving the broader societal goals for which the 

standards are intended. 

I. Reform of the Structure of the Passenger Car CAFE Standards 

An April 28, 2006, White House Fact Sheet states that the Administration is requesting additional legal authority to enable DOT to reform the passenger car 

CAFE standards ‘‘consistent with the approach taken with the light truck rule 

issued March 29.’’ 2 AIAM supports authorizing DOT to establish attribute-based 

class standards for passenger cars, as is currently authorized for light trucks. This 

approach would be consistent with the recommendations of the National Academy 

of Sciences and is generally consistent with the approach adopted by NHTSA in its 

recent light truck CAFE rulemaking. DOT should be given the flexibility to consider 

variations of the structure adopted in its light truck rule. Given our lack of experience with the new structure, it remains uncertain how the new structure will work 

in practice. Under no circumstances should the Department be authorized to adopt 

company standards based on past performance, such as uniform percentage increase 

(UPI) standards. We urge Congress to provide guidance to DOT by providing the 

underlying principles upon which the new standards must be based, including the 

three guiding principles discussed above. 

Over the years, AIAM has vehemently opposed any effort to authorize fuel economy standards based on the UPI approach. Respected analysts have consistently 

criticized the UPI approach, including the National Academy of Sciences, in its 

2001–2002 study, which states: 

The UPI system would impose higher burdens on those manufacturers who had 

already done the most to help reduce energy consumption. The peer-reviewed 

literature on environmental economics has consistently opposed this form of 

regulation. It is generally the most costly way to meet an environmental standard; it locks manufacturers into their relative positions, thus inhibiting competition; it rewards those who have been slow to comply with regulation; it punishes those who have done the most to help the environment; and it seems to 

convey a moral lesson that it is better to lag than to lead. In addition to fairness 

issues, the change would not eliminate the problems of the current CAFE system, but would create new ones. Implementation of such rules provides strong 

incentives for manufacturers to not exceed regulatory standards for fear that 

improvements will lead to tighter regulations. Thus, such rules tend to create 

beliefs counterproductive for longer-term goals.3

In addition to these shortcomings, the UPI approach would have the effect of locking manufacturers into their current model mix, leaving them potentially unable to 

meet changing consumer demands. 

We also believe that standards levels should be established by DOT through rulemaking. The complex technical and economic analyses necessary to set standards 

are better accomplished as part of an agency rulemaking rather than through direct 

legislation. DOT has substantial resources available to perform the required technology and economic analyses required for standard setting, and the use of an open, 

transparent, rulemaking process is needed to assure that the interests of all parties 

are considered in reaching a decision on the standards. 

34 

4 ‘‘Automobile Fuel Economy, How Far Should We Go?’’, National Research Council, 1992, 

page 184. 5 ‘‘Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,’’ National 

Research Council, 2002, page 114. 

II. Lead-Time 

The law provides that CAFE standards must be set at least 18 months prior to 

the start of the affected model year. However, the 18-month period is adequate to 

enable automakers to implement only the most minor of design changes. For more 

substantial changes, greater lead-time is necessary, not only to develop new technologies but also to deploy existing technologies into the fleet through normal product redesign cycles. It is instructive to note that the National Academy of Sciences 

projected the need for up to 15 years lead-time to meet significantly higher standards. It is also desirable to our planning efforts to have standards set for multiple 

years in a single rulemaking, as NHTSA did with the recent light truck rule. Automakers generally plan major vehicle redesigns on a 5 to 8 year cycle, with individual model changeovers staggered to allow the best use of limited engineering resources. Significant changes in fuel economy require a stable and predictable set of 

requirements that corresponds to this 5 to 8 year product cycle. We urge Congress 

and the Administration to consider the need for lead-time beyond the statutory minimum in order to implement new vehicle technology. 

III. Market-Based Approaches to Facilitating Higher Levels of Fuel 

Economy 

CAFE standards mandate the production of more fuel efficient vehicles but provide no incentive for consumers to purchase such vehicles. The most direct market 

signal to encourage consumers to demand fuel efficiency is an increase in the cost 

of driving. Recent record-high gasoline price increases encourage consumers to value 

fuel saving technologies. However, motorist interest in fuel savings often dims when 

fuel prices decline. Therefore, other types of incentives may be useful to maintain 

demand for fuel efficient vehicles when fuel prices are lower or to reinforce the market signal provided by high fuel prices. Such incentives include extending and expanding current tax credits and tax deductions for the purchase of fuel efficient and 

alternative fueled vehicles, access to preferential parking areas, and mandates for 

government fleet purchases. These and other incentives would further encourage 

manufacturers to develop and introduce advanced technologies by enhancing the 

market for vehicles that use such technologies. Advanced fuel-efficient technologies 

are frequently costly, particularly in their first years of introduction, and such incentives can facilitate the introduction of advanced technologies by helping to bridge 

the price differential between these vehicles and conventional vehicles. Congress has 

considered a variety of technology-based incentives in recent years to encourage consumers to purchase advanced technology vehicles. AIAM member companies have 

generally supported these incentives and support the President’s call to lift the current manufacturer cap on tax credits for hybrids and diesels to allow more consumers to be eligible for the full tax credit. Ideally, we believe that such incentives 

should be performance-based and technology-neutral, i.e., they should be designed 

to encourage the production and sale of fuel-efficient vehicles, regardless of the specific advanced technology selected by the manufacturer or where vehicles are manufactured. 

AIAM supports new authority for credit trading under the CAFE program. Allowing credit trading would provide manufacturers with increased compliance flexibility 

and encourage fuel economy improvements. The 1992 4 and 2001 5 NAS CAFE committees suggested this approach. Allowing such trading would also enhance the 

overall efficiency of the CAFE system. We believe that the rulemaking should examine credit trading among manufacturers and between a manufacturer’s passenger 

auto and light truck classes. 

IV. Domestic/Import Separate Fleet Requirement 

The current law requires dividing a manufacturer’s passenger car fleet into domestic and import classes that must comply separately with fuel economy standards. There is no similar requirement for light trucks. This requirement was originally intended to encourage domestic production of smaller vehicles by eliminating 

any compliance benefit for U.S.-based manufacturers from simply importing foreign 

produced, fuel efficient vehicles. Supporters of the ‘‘two-fleet’’ rule argue that the 

rule prevents manufacturers from shutting down U.S. production facilities for smaller, fuel efficient vehicles. In our view, the current record-high fuel prices and growing demand for fuel efficient vehicles indicates there is a strong incentive for maintaining or increasing U.S. production of fuel efficient vehicles by all manufacturers. 

35 

6 Id., pages 89–90. 7 Id., pages 183–184. 

Moreover, the ‘‘two-fleet’’ provision has created the unintended consequence of providing a disincentive for foreign-based companies to increase the U.S. content of 

their vehicles to levels above 75 percent, since doing so would place the vehicles in 

a separate compliance fleet. This disincentive is real, not theoretical, and has cost 

U.S. jobs. There have even been cases where a company has decreased the U.S. content of certain domestic vehicles to a level below 75 percent to allow those vehicles 

to be averaged with the manufacturer’s more efficient import fleet adversely impacting U.S. suppliers. 

The 2001 National Academy of Sciences study of the CAFE program 6 states that 

‘‘since the two-fleet rule increases costs to consumers, the committee believes it is 

no longer justifiable and should be eliminated.’’ The 1992 NAS CAFE committee 7

concluded that the separate fleet requirement ‘‘has no obvious or necessary connection to the achievement of fuel economy’’ and encouraged Congress to consider its 

repeal. We strongly concur in these assessments. 

V. Conclusion 

The auto industry is not the same as 30 years ago when the CAFE program was established. Since that time AIAM members have invested over $33 billion in U.S.- 

based vehicle, engine and parts manufacturing plants, and research and development facilities and developed a production capacity of 3.7 million vehicles annually. 

Combined, international automakers directly employ 103,000 Americans and generate 1.7 million U.S. jobs in dealerships and supplier industries nationwide. Approximately 60 percent of all the cars and light trucks sold each year in the U.S. 

by international automakers are made in the United States. 

Thank you. 

Senator LOTT. Thank you very much. 

Congressman Sharp, good to see you again. 

STATEMENT OF HON. PHILIP R. SHARP, PRESIDENT, 

RESOURCES FOR THE FUTURE (RFF) 

Mr. SHARP. Thank you very much, Mr. Chairman. Thank you for 

asking me to testify. 

I’m here as president of Resources for the Future, but I must 

quickly say the institution takes no position on public policy issues, 

so these are my own remarks. They derive from my experience, 

since leaving Congress, on two panels: the National Academy of 

Sciences study that you folks have been referring to all morning, 

and the National Commission on Energy Policy, a private bipartisan effort to make some policy recommendations. What is important, I believe, is that both of these panels have recommended that 

we ought to significantly increase the CAFE standards in this 

country, the fuel economy standards. Both also recommended the 

system needed to be reformed. 

Now, the reasons for taking action, some of which have been articulated this morning, are, first and foremost, our growing dependence on the global oil market, and the second, and very importantly, is the need to reduce the growth of carbon dioxide emissions 

here and around the world. Indeed, increasingly, many people believe that we are entering an era of the carbon-constrained economy, and it is very difficult to deal with transportation in that 

economy. 

But, third, it’s very important to recognize, over the last 30 

years, as a number of you on the panel have been involved in these 

policy disputes, the fact that the world price of oil goes up, and it 

goes down. We do not know where it is headed now, and we misjudged where it was headed on any number of occasions over the 

36 

last 30 years. The result is that consumer interest is on again, off 

again; investor interest is on again, off again; government policy is 

on again, off again—in terms of fuel economy or in terms of alternative fuels. So, it’s extremely important that the government have 

not a crash program, but a consistent program that helps to push 

our technology and push our marketplace. 

Now, let me just briefly state that, the National Academy of 

Sciences, as has been alluded to, identified current technologies 

available that can be used now and could be cost-effectively put 

into the system, and are coming into the system. 

But let me close by simply saying that CAFE has been an imperfect policy, no doubt about it, but it’s been a very important one. 

It has been identified as up to almost 3 million barrels of oil per 

day we’re not using that we would have been using today, had we 

not had this policy. But it is really important to understand that 

it’s also not the be-all and end-all solution to transportation problems and fuel economy in this country. Indeed, many believe that 

if we don’t have a sustained price of gasoline, meaning a sustained 

gasoline tax, we do not encourage efficient use of cars, nor the efficient purchase of cars. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Sharp follows:] 

PREPARED STATEMENT OF HON. PHILIP R. SHARP, PRESIDENT, 

RESOURCES FOR THE FUTURE (RFF) 

Mr. Chairman, 

Thank you for inviting me to testify. My name is Philip Sharp and I am President 

of Resources for the Future (RFF), a nonpartisan, social science think tank that has 

dealt with energy and resource issues for more than 50 years. As an institution, 

however, RFF does not take positions nor engage in advocacy, so the opinions expressed here are my own. 

For the record, I have been involved with fuel economy issues in several ways. 

During my service in Congress and on this Committee (1975–1995), I participated 

in the creation of the Corporate Average Fuel Economy (CAFE) policy and in the 

few legislative changes made since then. 

More recently, I was a member of the CAFE review panel sponsored by the National Research Council, an arm of the National Academy of Sciences. Its 2002 report recommended the government take further action to improve passenger-vehicle 

fuel economy and suggested possible reforms in the CAFE policy. (See: Effectiveness 

and Impact of Corporate Average Fuel Economy (CAFE) Standards at 

www.nap.edu.) 

Currently, I am also a member of the National Commission on Energy Policy, a 

private bipartisan panel funded by the Hewlett Foundation, which in 2004 recommended a significant increase in CAFE standards along with reforms to the current policy. (See: Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges at www.energycommission.org.) 

Both the Academy committee and the Energy Commission recommended Federal 

action to improve fuel economy for the purpose of mitigating two major concerns: 

oil security and growing carbon dioxide (CO2) emissions. 

Our growing consumption of oil, concentrated in the transportation sector, entails 

major risks associated with our dependence on the global oil market. And this consumption is a major contributor of CO2 to the atmosphere and hence to global climate change. 

Among oil-market concerns is the possibility of a serious supply disruption caused 

by political turmoil or terrorism with severe economic consequences; the pressure 

to compromise important U.S. foreign policy goals for the sake of oil supply; the possibility that oil production will peak and dramatically intensify global competition 

for supplies; and other issues. 

Among the uncertainties we face is where oil prices will go in the years ahead. 

Just as the dramatic rise in oil and natural gas prices over the last two years was 

not predicted, it is now unclear whether oil prices will rise further, drop back in 

37 

the $40-per-barrel range as some have predicted, or take a real nose dive as they 

did in 1986 and 1999. 

The history of price uncertainty has meant a history of on-again, off-again interest 

by consumers, investors, and government in fuel efficiency. 

In the face of such uncertainty, many, including the bipartisan commission, have 

concluded that it is prudent for the United States to maintain policies that push 

markets to improve fuel efficiency, to advance alternative fuels, and to expand public transit options in order to mitigate against global market risks and to reduce 

CO2 emissions growth. 

Action now by Congress on fuel economy standards obviously will have no immediate impact on gasoline prices. Indeed, it will take some years for changes in the 

policy to have an impact at all. 

But action now on fuel economy standards can help the United States address our 

long-term national interests. 

CAFE is currently getting a lot of attention because people are looking for immediate relief from high prices at the pump, but there is no fast or cheap way to escape 

the risks of oil dependence. Undoubtedly, one of the most expedient ways to reduce 

dependence would be to welcome higher oil and gasoline prices rather than decry 

them—an unlikely prospect for today’s consumers or leaders. 

The Academy Report 

Let me call your attention to a few of the findings and recommendations of the 

Academy committee, which may be useful in your consideration today. Attached, as 

Appendix A, is a portion of that report. 

The study notes in Finding 5, ‘‘technologies exist that if applied to passenger cars 

and light duty trucks, would significantly reduce fuel consumption within 15 years.’’ 

It notes in Finding 6 that much of this could be accomplished with the consumer 

breaking even—meaning that the savings in gasoline costs would offset the added 

cost to a new vehicle. And that calculation was made assuming gasoline only costs 

$1.50 per gallon. Furthermore, the hybrid car has greatly advanced since the report; 

given its costs in 2001, the committee did not consider it a realistic near-term option. 

The committee recommended several possible CAFE reforms (Recommendation 2), 

such as trading fuel economy credits, which has also been a recommendation of RFF 

researchers (see Fischer, Carolyn and Paul R. Portney, 2004, ‘‘Rewarding Automakers for Fuel Economy Improvements,’’ chapter 6 in New Approaches on Energy 

and the Environment: Policy Advice for the President, RFF Press). 

The committee cautioned that a major redesign (Recommendation 3) required 

more study than the committee had been able to devote to it. 

To avoid harmful effects on companies, on employment, and on consumers, the 

committee suggested allowing plenty of time for the industry to meet stiffer requirements. 

And finally, the government should continue to fund research on breakthrough 

technologies. 

Delegation to NHTSA 

Neither the National Academy committee nor the Energy Commission was willing 

or able to agree on recommended numerical CAFE targets—in part, because the 

task is a complex one and, in part, because the targets represent tradeoffs among 

various societal values and therefore are a political decision. 

The commission, in fact, recommended delegation of that responsibility: ‘‘Congress 

should instruct NHTSA to significantly strengthen Federal fuel economy standards 

. . . to take full advantage of the efficiency opportunities provided by currently 

available technologies and emerging hybrid and advanced diesel technologies’’ (see 

Appendix B). 

Given the considerable burden of legislating in this area, it seems appropriate 

that setting the targets and redesigning the policy could be delegated to the National Highway Safety Transportation Authority with legislative guidance and 

strong Congressional oversight. 

Possibilities for policy redesign were laid out before the House Committee on Energy and Commerce last week by my colleague, Dr. William Pizer (see Appendix C). 

Conclusion 

CAFE has been a very imperfect, but important, policy in dealing with fuel consumption. The Academy concluded, in 2002, that our oil imports would have been 

2.8 million barrels a day higher had the policy not existed. (See Finding 1 in the 

attached Appendix A). 

Many experts believe that a more effective approach to reducing fuel consumption—and a more cost-effective approach for the U.S. economy—would be stronger 

38 

1 A dissent by committee members David Greene and Maryann Keller on the impact of 

downweighting and downsizing is contained in Appendix A. They believe that the level of uncertainty is much higher than stated and that the change in the fatality rate due to efforts to improve fuel economy may have been zero. Their dissent is limited to the safety issue alone. 

gasoline tax or oil tax, either as an alternative to CAFE or in conjunction with 

CAFE. The impact would not only encourage consumers to purchase more efficient 

vehicles but also encourage them to be more economical in their driving, a critical 

component that CAFE does nothing to address. Indeed, such a tax would have a 

more rapid impact on consumption than is possible through CAFE alone. These experts, of course, are not subject to popular election. 

Mr. Chairman, after 20 years of stalemate on fuel economy issues, we finally have 

a moment where change is possible. Let’s do it! 

APPENDIX A—EFFECTIVENESS AND IMPACT OF CORPORATE AVERAGE FUEL ECONOMY

(CAFE) STANDARDS

Findings 

Finding 1. The CAFE program has clearly contributed to increased fuel economy 

of the Nation’s light-duty vehicle fleet during the past 22 years. During the 1970s, 

high fuel prices and a desire on the part of automakers to reduce costs by reducing 

the weight of vehicles contributed to improved fuel economy. CAFE standards reinforced that effect. Moreover, the CAFE program has been particularly effective in 

keeping fuel economy above the levels to which it might have fallen when real gasoline prices began their long decline in the early 1980s. Improved fuel economy has 

reduced dependence on imported oil, improved the nation’s terms of trade, and reduced emissions of carbon dioxide, a principal greenhouse gas, relative to what they 

otherwise would have been. If fuel economy had not improved, gasoline consumption 

(and crude oil imports) would be about 2.8 million barrels per day greater than it 

is, or about 14 percent of today’s consumption. 

Finding 2. Past improvements in the overall fuel economy of the Nation’s lightduty vehicle fleet have entailed very real, albeit indirect, costs. In particular, all but 

two members of the committee concluded that the downweighting and downsizing 

that occurred in the late 1970s and early 1980s, some of which was due to CAFE 

standards, probably resulted in an additional 1,300 to 2,600 traffic fatalities in 

1993.1 In addition, the diversion of carmakers’ efforts to improve fuel economy deprived new-car buyers of some amenities they clearly value, such as faster acceleration, greater carrying or towing capacity, and reliability. 

Finding 3. Certain aspects of the CAFE program have not functioned as intended: 

• The distinction between a car for personal use and a truck for work use/cargo 

transport has broken down, initially with minivans and more recently with 

sport utility vehicles (SUVs) and cross-over vehicles. The car/truck distinction 

has been stretched well beyond the original purpose. 

• The Committee could find no evidence that the two-fleet rule distinguishing between domestic and foreign content has had any perceptible effect on total employment in the U.S. automotive industry. 

• The provision creating extra credits for multifuel vehicles has had, if any, a negative effect on fuel economy, petroleum consumption, greenhouse gas emissions, 

and cost. These vehicles seldom use any fuel other than gasoline yet enable 

automakers to increase their production of less fuel efficient vehicles. 

Finding 4. In the period since 1975, manufacturers have made considerable improvements in the basic efficiency of engines, drive trains, and vehicle aerodynamics. These improvements could have been used to improve fuel economy and/ 

or performance. Looking at the entire light-duty fleet, both cars and trucks, between 

1975 and 1984, the technology improvements were concentrated on fuel economy: 

It improved by 62 percent without any loss of performance as measured by 0–60 

mph acceleration times. By 1985, light-duty vehicles had improved enough to meet 

CAFE standards. Thereafter, technology improvements were concentrated principally on performance and other vehicle attributes (including improved occupant 

protection). Fuel economy remained essentially unchanged while vehicles became 20 

percent heavier and 0–60 mph acceleration times became, on average, 25 percent 

faster. 

Finding 5. Technologies exist that, if applied to passenger cars and light-duty 

trucks, would significantly reduce fuel consumption within 15 years. Auto manufacturers are already offering or introducing many of these technologies in other markets (Europe and Japan, for example), where much higher fuel prices ($4 to $5/gal) 

39 

have justified their development. However, economic, regulatory, safety, and consumer-preference-related issues will influence the extent to which these technologies 

are applied in the United States. 

Several new technologies such as advanced lean exhaust gas after-treatment systems for high-speed diesels and direct-injection gasoline engines, which are currently under development, are expected to offer even greater potential for reductions 

in fuel consumption. However, their development cycles as well as future regulatory 

requirements will influence if and when these technologies penetrate deeply into the 

U.S. market. 

The Committee conducted a detailed assessment of the technological potential for 

improving the fuel efficiency of 10 different classes of vehicles, ranging from subcompact and compact cars to SUVs, pickups, and minivans. In addition, it estimated 

the range in incremental costs to the consumer that would be attributable to the 

application of these engine, transmission, and vehicle-related technologies. 

Chapter 3 presents the results of these analyses as curves that represent the incremental benefit in fuel consumption versus the incremental cost increase over a 

defined baseline vehicle technology. Projections of both incremental costs and fuel 

consumption benefits are very uncertain, and the actual results obtained in practice 

may be significantly higher or lower than shown here. Three potential development 

paths are chosen as examples of possible product improvement approaches, which 

illustrate the trade-offs auto manufacturers may consider in future efforts to improve fuel efficiency. 

Assessment of currently offered product technologies suggests that light-duty 

trucks, including SUVs, pickups, and minivans, offer the greatest potential to reduce 

fuel consumption on a total-gallons-saved basis. 

Finding 6. In an attempt to evaluate the economic trade-offs associated with the 

introduction of existing and emerging technologies to improve fuel economy, the 

committee conducted what it called cost-efficient analysis. That is, the committee 

identified packages of existing and emerging technologies that could be introduced 

over the next 10 to 15 years that would improve fuel economy up to the point where 

further increases in fuel economy would not be reimbursed by fuel savings. The size, 

weight, and performance characteristics of the vehicles were held constant. The 

technologies, fuel consumption estimates, and cost projections described in Chapter 

3 were used as inputs to this cost-efficient analysis. 

These cost-efficient calculations depend critically on the assumptions one makes 

about a variety of parameters. For the purpose of calculation, the committee assumed as follows: (1) gasoline is priced at $1.50/gal, (2) a car is driven 15,600 miles 

in its first year, after which miles driven declines at 4.5 percent annually, (3) onthe-road fuel economy is 15 percent less than the Environmental Protection Agency’s test rating, and (4) the added weight of equipment required for future safety 

and emission regulations will exact a 3.5 percent fuel economy penalty. 

One other assumption is required to ascertain cost-efficient technology packages— 

the horizon over which fuel economy gains ought to be counted. Under one view, 

car purchasers consider fuel economy over the entire life of a new vehicle; even if 

they intend to sell it after 5 years, say, they care about fuel economy because it will 

affect the price they will receive for their used car. Alternatively, consumers may 

take a shorter-term perspective, not looking beyond, say, 3 years. This latter view, 

of course, will affect the identification of cost-efficient packages because there will 

be many fewer years of fuel economy savings to offset the initial purchase price. 

The full results of this analysis are presented in Chapter 4. To provide one illustration, however, consider a midsize SUV. The current sales-weighted fleet fuel 

economy average for this class of vehicle is 21 mpg. If consumers consider only a 

3-year payback period, fuel economy of 22.7 mpg would represent the cost-efficient 

level. If, on the other hand, consumers take the full 14-year average life of a vehicle 

as their horizon, the cost-efficient level increases to 28 mpg (with fuel savings discounted at 12 percent). The longer the consumer’s planning horizon, in other words, 

the greater are the fuel economy savings against which to balance the higher initial 

costs of fuel-saving technologies. 

The Committee cannot emphasize strongly enough that the cost-efficient fuel 

economy levels identified in Tables 4–2 and 4–3 in Chapter 4 are not recommended 

fuel economy goals. Rather, they are reflections of technological possibilities, economic realities, and assumptions about parameter values and consumer behavior. 

Given the choice, consumers might well spend their money on other vehicle amenities, such as greater acceleration or towing capacity, rather than on the fuel economy cost-efficient technology packages. 

Finding 7. There is a marked inconsistency between pressing automotive manufacturers for improved fuel economy from new vehicles on the one hand and insisting on low real gasoline prices on the other. Higher real prices for gasoline—for inVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
40 

2Feebates are taxes on vehicles achieving less than the average fuel economy coupled with 

rebates to vehicles achieving better than average fuel economy. 

stance, through increased gasoline taxes—would create both a demand for fuel-efficient new vehicles and an incentive for owners of existing vehicles to drive them 

less. 

Finding 8. The committee identified externalities of about $0.30/gal of gasoline associated with the combined impacts of fuel consumption on greenhouse gas emissions and on world oil market conditions. These externalities are not necessarily 

taken into account when consumers purchase new vehicles. Other analysts might 

produce lower or higher estimates of externalities. 

Finding 9. There are significant uncertainties surrounding the societal costs and 

benefits of raising fuel economy standards for the light-duty fleet. These uncertainties include the cost of implementing existing technologies or developing new ones; 

the future price of gasoline; the nature of consumer preferences for vehicle type, performance, and other features; and the potential safety consequences of altered 

standards. The higher the target for average fuel economy, the greater the uncertainty about the cost of reaching that target. 

Finding 10. Raising CAFE standards would reduce future fuel consumption below 

what it otherwise would be; however, other policies could accomplish the same end 

at lower cost, provide more flexibility to manufacturers, or address inequities arising 

from the present system. Possible alternatives that appear to the committee to be 

superior to the current CAFE structure include tradable credits for fuel economy improvements, feebates,2 higher fuel taxes, standards based on vehicle attributes (for 

example, vehicle weight, size, or payload), or some combination of these. 

Finding 11. Changing the current CAFE system to one featuring tradable fuel 

economy credits and a cap on the price of these credits appears to be particularly 

attractive. It would provide incentives for all manufacturers, including those that 

exceed the fuel economy targets, to continually increase fuel economy, while allowing manufacturers flexibility to meet consumer preferences. Such a system would 

also limit costs imposed on manufacturers and consumers if standards turn out to 

be more difficult to meet than expected. It would also reveal information about the 

costs of fuel economy improvements and thus promote better-informed policy decisions. 

Finding 12. The CAFE program might be improved significantly by converting it 

to a system in which fuel economy targets depend on vehicle attributes. One such 

system would make the fuel economy target dependent on vehicle weight, with 

lower fuel consumption targets set for lighter vehicles and higher targets for heavier 

vehicles, up to some maximum weight, above which the target would be weightindependent. Such a system would create incentives to reduce the variance in vehicle weights between large and small vehicles, thus providing for overall vehicle safety. It has the potential to increase fuel economy with fewer negative effects on both 

safety and consumer choice. Above the maximum weight, vehicles would need additional advanced fuel economy technology to meet the targets. The committee believes that although such a change is promising, it requires more investigation than 

was possible in this study. 

Finding 13. If an increase in fuel economy is effected by a system that encourages 

either downweighting or the production and sale of more small cars, some additional 

traffic fatalities would be expected. However, the actual effects would be uncertain, 

and any adverse safety impact could be minimized, or even reversed, if weight and 

size reductions were limited to heavier vehicles (particularly those over 4,000 lb.). 

Larger vehicles would then be less damaging (aggressive) in crashes with all other 

vehicles and thus pose less risk to other drivers on the road. 

Finding 14. Advanced technologies—including direct-injection, lean-burn gasoline 

engines; direct-injection compression-ignition (diesel) engines; and hybrid electric vehicles—have the potential to improve vehicle fuel economy by 20 to 40 percent or 

more, although at a significantly higher cost. However, lean-burn gasoline engines 

and diesel engines, the latter of which are already producing large fuel economy 

gains in Europe, face significant technical challenges to meet the Tier 2 emission 

standards established by the Environmental Protection Agency under the 1990 

amendments to the Clean Air Act and California’s low-emission-vehicle (LEV II) 

standards. The major problems are the Tier 2 emissions standards for nitrogen oxides and particulates and the requirement that emission control systems be certified 

for a 120,000-mile lifetime. If direct-injection gasoline and diesel engines are to be 

used extensively to improve light-duty vehicle fuel economy, significant technical developments concerning emissions control will have to occur or some adjustments to 

the Tier 2 emissions standards will have to be made. Hybrid electric vehicles face 

41 

significant cost hurdles, and fuel-cell vehicles face significant technological, economic, and fueling infrastructure barriers. 

Finding 15. Technology changes require very long lead times to be introduced into 

the manufacturers’ product lines. Any policy that is implemented too aggressively 

(that is, in too short a period of time) has the potential to adversely affect manufacturers, their suppliers, their employees, and consumers. Little can be done to improve the fuel economy of the new vehicle fleet for several years because production 

plans already are in place. The widespread penetration of even existing technologies 

will probably require 4 to 8 years. For emerging technologies that require additional 

research and development, this time lag can be considerably longer. In addition, 

considerably more time is required to replace the existing vehicle fleet (on the order 

of 200 million vehicles) with new, more efficient vehicles. Thus, while there would 

be incremental gains each year as improved vehicles enter the fleet, major changes 

in the transportation sector’s fuel consumption will require decades. 

Recommendations 

Recommendation 1. Because of concerns about greenhouse gas emissions and the 

level of oil imports, it is appropriate for the Federal Government to ensure fuel economy levels beyond those expected to result from market forces alone. Selection of 

fuel economy targets will require uncertain and difficult trade-offs among environmental benefits, vehicle safety, cost, oil import dependence, and consumer preferences. The committee believes that these trade-offs rightfully reside with elected 

officials. 

Recommendation 2. The CAFE system, or any alternative regulatory system, 

should include broad trading of fuel economy credits. The committee believes a trading system would be less costly than the current CAFE system; provide more flexibility and options to the automotive companies; give better information on the cost 

of fuel economy changes to the private sector, public interest groups, and regulators; 

and provide incentives to all manufacturers to improve fuel economy. Importantly, 

trading of fuel economy credits would allow for more ambitious fuel economy goals 

than exist under the current CAFE system, while simultaneously reducing the economic cost of the program. 

Recommendation 3. Consideration should be given to designing and evaluating an 

approach with fuel economy targets that are dependent on vehicle attributes, such 

as vehicle weight, that inherently influence fuel use. Any such system should be designed to have minimal adverse safety consequences. 

Recommendation 4. Under any system of fuel economy targets, the two-fleet rule 

for domestic and foreign content should be eliminated. 

Recommendation 5. CAFE credits for dual-fuel vehicles should be eliminated, with 

a long enough lead time to limit adverse financial impacts on the automotive industry. 

Recommendation 6. To promote the development of longer-range, breakthrough 

technologies, the government should continue to fund, in cooperation with the automotive industry, precompetitive research aimed at technologies to improve vehicle 

fuel economy, safety, and emissions. It is only through such breakthrough technologies that dramatic increases in fuel economy will become possible. 

Recommendation 7. Because of its importance to the fuel economy debate, the relationship between fuel economy and safety should be clarified. The Committee 

urges the National Highway Traffic Safety Administration to undertake additional 

research on this subject, including (but not limited to) a replication, using current 

field data, of its 1997 analysis of the relationship between vehicle size and fatality 

risk. 

APPENDIX B—ENDING THE ENERGY STALEMATE: A BIPARTISAN STRATEGY TO

MEET AMERICA’S ENERGY CHALLENGES

Policy Recommendations 

Reduce U.S. Oil Consumption Through Increased Vehicle Efficiency and 

Production of Alternative Fuels 

Reducing U.S. oil consumption is a critical complement to the measures described 

in previous sections for expanding and diversifying global supplies of oil. A key to 

slowing continued growth in U.S. oil consumption—which is otherwise projected to 

increase by more than 40 percent over the next two decades—is breaking the current political stalemate on changing Corporate Average Fuel Economy (CAFE) 

standards for new motor vehicles. Although recommendations in later chapters of 

this report—notably those aimed at promoting the development of alternative transportation fuels—will also help to reduce oil demand, improving passenger vehicle 

42 

fuel economy is by far the most significant oil demand reduction measure proposed 

by the Commission. 

The Commission’s approach to vehicle efficiency builds on three decades of experience with fuel economy regulation and a record of impressive technological advances 

by the automobile manufacturing industry. As a result of CAFE standards introduced in the 1970s and high gasoline prices in the late 1970s and early 1980s, the 

average fuel economy of new light-duty vehicles improved from 15 miles per gallon 

(mpg) in 1975 to a peak of 26 mpg in 1987, a 73 percent increase over a time period 

that also saw substantial progress in improved vehicle performance and safety. The 

trend toward greater fuel economy, however, did not continue. Passenger car CAFE 

standards peaked in 1985 at 27.5 mpg and have not changed since. Light-duty truck 

standards were recently raised by 1.5 mpg to a new standard of 22.2 mpg which 

will go into effect in 2005—prior to this increase they had remained essentially unchanged since 1987. Thus, for most of the last two decades overall fleet fuel economy 

has stagnated and continued technology gains—such as port fuel injection, frontwheel drive, valve technology, and transmission improvements—have been applied 

to increase vehicle size and power, rather than fuel economy. In fact, at 24 mpg on 

average, new vehicle fuel economy is now no higher than it was in 1981, but vehicle 

weight has increased by 24 percent and horsepower has increased by 93 percent. 

The Commission believes that three factors are largely responsible for the current 

CAFE stalemate: (1) uncertainty over the future costs of fuel-saving technologies; 

(2) fear that more stringent standards will lead to smaller, lighter vehicles and increased traffic fatalities; and (3) concerns that higher fuel economy standards will 

put the U.S. auto industry and auto workers at a competitive disadvantage. 

With respect to the first of these factors—cost and technology potential—numerous recent analyses by the National Academy of Sciences and others have concluded 

that significant improvements in the fuel economy of conventional gasoline vehicles 

are achievable and cost-effective, in the sense that fuel savings over the life of the 

vehicle would more than offset incremental technology costs. Estimates of cost-effectiveness do not, however, account for—and thus cannot by themselves resolve—potential trade-offs in terms of vehicle performance, safety, and impacts on jobs and 

competitiveness. 

Given these complexities, the Commission was unable to agree on a numerical 

fuel-economy standard. 

The recommendations that follow nevertheless reflect the Commission’s conclusion 

that a combination of improved conventional gasoline technologies and advanced hybrid-electric and diesel technologies presents an opportunity to significantly increase 

fuel economy without sacrificing size, power, safety, and other attributes that consumers value. Note that the Commission defines ‘‘advanced diesel’’ in this context 

as a diesel passenger vehicle that meets stringent new Federal air pollution control 

requirements—or so-called ‘‘Tier 2’’ standards—that are being phased in from 2004 

to 2008 (no currently available passenger diesel vehicles meet these standards). Ultimately, the Commission believes that a combination of higher standards, CAFE reforms, and complementary incentive programs will allow the Nation to capitalize on 

potentially ‘‘game changing’’ technologies such as hybrids and advanced diesels in 

a manner that greatly enhances its ability to achieve oil security and environmental 

goals, as well as its ability to sustain the future competitiveness of the U.S. automobile industry. 

Specifically, the Commission recommends: 

• Raising Passenger Vehicle Fuel Economy Standards—Congress should instruct 

the National Highway Traffic Safety Administration (NHTSA) to significantly 

strengthen Federal fuel economy standards for passenger vehicles to take full 

advantage of the efficiency opportunities provided by currently available technologies and emerging hybrid and advanced diesel technologies. Consistent with 

existing statutory requirements, NHTSA should—in developing new standards—give due consideration to vehicle performance, safety, job impacts, and 

competitiveness concerns. To allow manufacturers sufficient time to adjust, new 

standards should be phased-in over a five-year period beginning no later than 

2010. 

• Reforming CAFE—To facilitate compliance with higher standards, Congress 

should modify CAFE to increase program flexibility by allowing manufacturers 

to trade fuel economy credits with each other and across the light truck and 

passenger vehicle fleets. In addition, Congress should authorize NHTSA to consider additional mechanisms that could further simplify the program, increase 

flexibility, and reduce compliance costs. One such mechanism is a compliance 

‘‘safety valve’’ that would permit manufacturers to purchase CAFE credits from 

the government at a pre-determined price. Such a mechanism would effectively 

43 

cap costs to consumers and manufacturers should fuel-saving technologies not 

mature as expected or prove more expensive than anticipated. 

• Providing Economic Incentives for Hybrids and Advanced Diesels—Congress should establish a five- to ten-year, $3 billion tax incentive program for manufacturers and consumers to encourage the domestic production and purchase of 

hybrid-electric and advanced diesel vehicles that achieve superior fuel economy. 

APPENDIX C—TESTIMONY ON CAFE PROGRAM REFORMS

PREPARED BY WILLIAM A. PIZER

Thank you, Mr. Chairman, for the opportunity to offer testimony before the Committee about the possibility of reforming the Corporate Average Fuel Economy 

(CAFE) program, with particular reference to the recently introduced reforms for 

light trucks. Over the past decade, I have had the privilege of working on energy 

and environment issues for organizations as diverse as the President’s Council of 

Economic Advisers and the National Commission on Energy Policy. Currently, I am 

a senior fellow at Resources for the Future (RFF), a 54-year-old research institution, 

headquartered here in Washington, D.C., which focuses on energy, environmental, 

and natural resource issues. 

RFF is both independent and nonpartisan, and shares the results of its economic 

and policy analyses with members of both parties, environmental and business advocates, academics, members of the press, and interested citizens. RFF neither lobbies nor takes positions on specific legislative or regulatory proposals, although individual researchers are encouraged to express their individual opinions, which may 

differ from those of other RFF scholars, officers, and directors. I emphasize that the 

views I present today are mine alone. 

Just a few weeks ago, the National Highway Traffic and Safety Administration 

(NHTSA) released a final CAFE rule for the years 2008–2011 that raises the standard from its 2007 level of 22.2 miles per gallon (mpg), to 22.5 mpg in 2008, 23.1 

mpg in 2009, and 23.5 mpg in 2010. But what should be of more interest to this 

Committee are two major changes to the structure of the program included in the 

final rule. First, the rule differentiated standards across manufacturers based on 

the size of the vehicles they produce, and second, starting in 2011, the rule set these 

standards based on an explicit cost-benefit analysis. Previously, there was a single 

standard for all light-truck manufacturers and that standard was set, based on the 

ability of the least capable manufacturer. In addition to these major structural 

changes, the rule will also for the first time include medium-duty passenger vehicles 

in the CAFE program starting in 2011. With the inclusion of these heavier and naturally less fuel-efficient vehicles, the estimated average fuel economy will be 24.0 

mpg in 2011. 

At the time the light-truck rule was proposed last Fall, I offered my opinion— 

which I have appended to this statement—that the reforms were a clear move toward a more efficient system, and perhaps even an optimal one, given statutory constraints. I also indicated that, based on an analysis of the underlying data from the 

recent National Research Council (NRC) study, the 2011 fuel economy standard 

should be increased based on the recent, dramatic increase in forecasted oil price 

and, in turn, the dramatic increase in benefits from improved fuel economy. What 

I would like to do today is first review my previous comments on the design of the 

rule for light trucks and explain why they are equally relevant for cars. I will then 

discuss additional reforms possible in statute—the ability to trade CAFE credits 

across fleets, firms, and time, as well as a cost-limiting safety valve that were not 

possible in the light-truck rulemaking. I will briefly remark on the fact that dramatically higher oil prices did not lead to an noticeable increase in the 2011 fuel 

economy standard and finally offer a few reflections on the overall desirability of 

CAFE from an economist’s perspective. 

Light-Truck CAFE Before the Recent Reforms 

To understand the recent reforms to the light-truck CAFE program, as well as 

the potential for further statutory reforms, it is useful to consider how ‘‘un-reformed’’ or traditional CAFE works. There is a single, one-size-fits-all fuel economy 

standard for light trucks that must be met, on average, by each manufacturer. That 

is, each manufacturer takes the fuel economy of each light-truck model they 

produce, and then averages those numbers weighted by production volume. That 

number must be at or above the mandated standard. If the manufacturer beats the 

standard, the manufacturer collects CAFE credits that can be used to make up any 

shortfall in the next three years. If the manufacturer misses the standard and does 

not have any credits, there is a penalty equal to $5.50 per 0.1 mpg per vehicle. The 

44 

penalty is routinely paid by European manufacturers, but has never been adopted 

by domestic or Asian manufacturers, who have voiced concern about the penalization notion surrounding the fee. 

For light trucks, the level of the traditional standard is set with an eye toward 

achieving the maximum possible fuel economy, but with considerable deference 

given to the ability of each manufacturer to meet that standard. The National Highway Traffic Safety Administration (NHTSA) has typically tailored the standard to 

be economically practicable for the least capable vehicle manufacturer while also 

considering the Nation’s need to conserve energy, technological feasibility, and the 

impact of other motor vehicle standards on fuel economy. The actual analysis is 

based on confidential manufacturer product plans, data, and modeling. 

One consequence of the traditional approach is that the single standard for light 

trucks is tougher—that is, more expensive—for manufacturers with a full line that 

includes large trucks with lower fuel economy, and easier for manufacturers focused 

on small trucks with higher fuel economy. For example, Honda has consistently 

beaten the existing light-truck CAFE standard by 4–5 mpg, suggesting that it has 

had no effect on their production decisions, while the major domestic manufacturers 

that produce a broader range of trucks have hovered right at the standard, suggesting a real impact. 

The Reformed CAFE Rule 

The recently finalized rule for light trucks makes two major changes to the traditional approach. The first is a shift from a single light-truck standard for all manufacturers to differentiated standards for each manufacturer based on the size of the 

vehicles they produce. The second is a shift to setting the standard based on an explicit and careful cost-benefit analysis, involving the costs to manufacturers, the 

value of fuel savings, and other consequences of gasoline and vehicle usage. 

Unlike the traditional CAFE rule for light trucks, the recently finalized rule differentiates standards for each manufacturer based on a continuous schedule of targets for different-sized vehicles. The size of the vehicle, or footprint, is defined by 

multiplying the track width (the distance between tires on the same axle) by the 

wheelbase (the distance between centerlines on each axle). In 2011, the fuel economy schedule ranges from 30.42 mpg for the smallest vehicle to 21.79 mpg for the 

largest vehicle (Table 4 in the Final Rule). Among manufacturers, this is forecast 

to result in a fleet standard ranging from 23.2 mpg for General Motors (GM) to 27.1 

mpg for Suzuki (Table 13). 

Differentiating manufacturers’ standards based on the mix of large and small 

light trucks that they produce—so that Suzuki faces a higher standard than GM— 

has important distributional consequences. Unlike the traditional light-truck CAFE 

rule, in which the single standard was much harder for GM and other manufacturers of large trucks to meet, the reformed rule allocates the overall burden more 

evenly by shifting some of it away from manufacturers of large trucks and toward 

manufacturers of small trucks. 

This distributional change will also lower the cost of a given improvement in fuel 

economy across all fleets (or increase the overall improvement in fuel economy for 

a given total cost). By seeking larger fuel savings from small truck manufacturers, 

who previously faced little or no CAFE incentive to improve fuel economy, opportunities exist to improve fuel economy that previously were not being captured. Some 

of these efficiency improvements are cheaper than the ones previously achieved 

through almost exclusive reliance on improvements among manufacturers of large 

trucks. That is, the program achieves lower cost and/or more fuel savings (estimated 

at 15–20 percent in the Regulatory Impact Analysis, Table VII–1). 

There is a third, important effect associated with differentiating standards based 

on the size of vehicles: It substantially alters the incentives to downsize. Downsizing 

is one way a manufacturer could comply with the traditional light-truck CAFE rule. 

As noted, smaller trucks naturally have higher fuel economy. Instead of using technology to improve fuel economy, manufacturers could simply choose to make smaller 

trucks. While some might applaud a shift to smaller vehicles, this frequently raises 

concerns about safety. 

By making the standard higher for smaller trucks, the incentive to downsize to 

comply with the reformed CAFE rule is reduced if not eliminated, thereby addressing these concerns about safety. Making smaller trucks does not help a manufacturer meet their standard—the natural improvement in fuel economy associated 

with the smaller vehicle is offset by the reformed CAFE’s requirement that smaller 

vehicles achieve higher fuel economy. 

The second major change in the reformed CAFE rule comes in 2011, when fuel 

economy will be set, based on maximizing net benefits from reduced petroleum consumption, including the reduced consequences of oil-supply disruptions, the reduced 

45 

market power of oil-exporting countries, and environmental concerns, as well as effects of fuel economy on congestion, accidents, and greater vehicle range. These benefits are weighed against the costs of installing new technologies to improve fuel 

economy. This sharply contrasts the previous approach, which focused on the ability 

of the least capable manufacturer—that is, the one making the largest trucks. In 

fact, with the shift to differentiated standards, the notion of a least capable manufacturer disappears; instead, each company faces a standard that is tailored to be 

as difficult as any other. This latter change represents an unambiguous move toward greater efficiency in the light-truck CAFE program. While the traditional approach highlighted factors that should be considered when setting the standard, it 

did not suggest how they ought to be balanced, somewhat ironically using cost-benefit analysis as part of the regulatory impact analysis after the standard was set. 

The proposed reforms put the cost-benefit analysis front and center, stipulating that 

those factors should be balanced based on the best available valuations. By definition, such an approach is the most efficient possible approach to setting CAFE 

standards once the structure of the program is determined. 

Applying the Light-Truck Reforms to Passenger Cars 

Both of the reforms adopted in the recent light-truck rule—differentiating manufacturers’ standards based on their mix of large and small vehicles, as well as setting the standards based on careful cost-benefit analysis—provide similar opportunities to improve the passenger car CAFE program. Unlike the light-truck program, 

however, these changes must be made in statute. While NHTSA had the authority 

to differentiate manufacturers’ standards and to shift to a cost-benefit approach for 

light trucks, the existing statute is much more specific for passenger cars. 

As was the case for light trucks, differentiating the passenger car standard among 

manufacturers based on their mix of large and small cars provides three advantages. First, it creates a more equitable burden. Because large cars naturally have 

lower fuel economy than smaller cars, a single standard for all manufacturers would 

put a disproportionate burden on those who produce larger cars. In contrast, a differentiated standard would shift that burden toward small car manufacturers. Second, this shift in burden will also mean a shift from higher-cost improvements in 

large cars to lower-cost improvements in small cars. This will lower the cost of 

achieving a given overall level of fuel economy, or allow a greater improvement in 

overall fuel economy at a given total cost. Finally, by making the standard progressively higher for smaller cars, the incentive to downsize passenger cars is reduced 

if not eliminated. The natural fuel economy improvement associated with 

downsizing is now penalized by a higher standard. This addresses past concerns 

that CAFE produces smaller, less safe vehicles. 

The use of a cost-benefit approach to set the passenger car standard would, by 

definition, create a program that maximized efficiency—that is, the net benefits to 

society—of the program, given the design (for example, differentiated standards and 

fleet averaging). 

Going Beyond the Light-Truck Reforms 

There are at least four areas where light-truck reform was limited by statute but 

where greater efficiency could be realized by changing the structure of the program. 

Three relate to simply giving manufacturers more flexibility to meet a given standard without affecting the outcome in terms of overall oil savings. The fourth addresses uncertainty about compliance costs, reducing the risk of high costs at the 

expense of possibly achieving lower oil savings. 

The first of these further reforms would allow manufacturers to average fuel economy jointly over both cars and light-truck fleets. Currently, manufacturers must 

meet each standard separately, even though cheaper opportunities may exist in one 

fleet versus the other. From a national perspective, Congress should not care whether fuel savings are achieved in one fleet or the other. Allowing manufacturers to 

trade off cheaper improvements in one fleet against more expensive improvements 

in the other would lower overall costs without affecting oil savings. 

Second, Congress could also allow credit trading among manufacturers. That is, 

when one manufacturer exceeds their standard, they earn credits that could then 

be sold to other manufacturers struggling to meet theirs. This reform reduces costs 

by shifting improvements to manufacturers with lower costs and away from manufacturers with higher costs. And like the first reform, this action has no effect on 

overall oil savings. 

It is useful to note that historically there has been opposition to trading because 

it likely further exacerbates the disparity between manufacturers of large and small 

vehicles. That is, even though trading would generally benefit both buyers and sellers of CAFE credits, under traditional CAFE, it would tend to provide larger beneVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
46 

fits to sellers—manufacturers of small cars who can easily if not effortlessly exceed 

the standard. However, with size-based CAFE, the initial compliance burden is 

more evenly distributed among manufacturers of both large and small vehicles, 

erasing the likely larger benefit to manufacturers of small vehicles. 

Third, Congress could allow companies who exceed the standard in one year to 

bank credits for the indefinite future. Banking not only leaves the total volume of 

reduced oil consumption unchanged, it moves the savings forward in time—that is, 

we see the effects of energy conservation sooner. Banking has easily been the most 

successful element of the acid rain trading program used by electric utilities to reduce sulfur dioxide emissions. In that case, firms reduced emissions by twice as 

much as the law required to create flexibility for future compliance. Currently, 

banking is allowed in the CAFE program—but for only up to three years, after 

which time the banked credits expire, thereby reducing the incentive to over-comply 

and to reduce oil consumption earlier. New legislation could remove this restriction. 

Finally, Congress could create a safety valve, whereby manufacturers could opt 

to pay a specified fee if compliance costs end up being unexpectedly high. This 

would allow manufacturers to avoid the risk of high costs in exchange for the possibility that fuel economy—and oil savings—might be lower if that turns out to be 

the case. As noted earlier, the current program already has such a fee, defined as 

a penalty, which is often used by European manufacturers but has been avoided by 

domestic and Asian manufacturers. By ‘‘decriminalizing the fee, Congress could help 

allay manufacturer concerns and reduce the central debate about how much technology really costs—perhaps allowing higher standards to be introduced more quickly. 

Transparency About Costs 

The recent light-truck rule highlighted the fact that the cost estimates used to set 

fuel economy standards remain something of a mystery. Despite the fact that the 

benefits of improving fuel economy increased by 50 percent between when the proposed and final rules were published, due to dramatic increases in forecast oil 

prices, the estimated aggregate fuel economy standard for 2011 increased by only 

0.2 mpg, from 23.9 to 24.1 mpg (excluding medium-duty vehicles, which were not 

included in the proposed rule). Yet, the standard is supposed to represent a balancing of costs and benefits. 

The final rule indicates that there were countervailing changes in estimated 

costs—related to the costs of technologies and especially the time required to phase 

in those technologies—but those changes are difficult to judge because the underlying details of the cost model are not spelled out clearly. Without any countervailing effects, my comments last fall suggested that a 50 percent increase in benefits might lead to a 4–5 mpg increase in the standard. Having reviewed other cost 

analyses, I might adjust that downward, closer to 2 mpg. In any case, a 0.2 mpg 

increase is surprisingly small despite the indicated countervailing modeling 

changes. 

It might be desirable, therefore, for the Department of Transportation to be required to make public the cost modeling used in any rulemaking to set fuel economy 

standards. In the past, such disclosure would have been nearly impossible, as it entirely centered on the capabilities of one manufacturer. Now, there is presumably 

safety in numbers: Cost modeling for particular vehicle sizes can be disclosed, on 

average, without necessarily revealing proprietary information. Such a requirement 

would facilitate a more informed debate in the rulemaking process. 

Do Fuel Economy Standards Make Sense? 

So far, the discussion has centered on how to improve CAFE through statutory 

reform—that is, how to get more fuel savings at lower cost, while addressing concerns about equity and safety. This is an extremely important question, given the 

likelihood that the CAFE program will not go away and will remain the main policy 

tool for addressing concerns about petroleum use in the transportation sector. Nonetheless, it is useful to ask whether CAFE makes sense compared to other choices, 

or whether Congress should instead focus on an entirely different policy. 

The underlying motivation for CAFE is the desire to reduce oil demand because 

of concerns about costs, security, and the environment. Given this underlying motivation, many people, especially economists, often criticize CAFE policy for two related reasons: First, it does not encourage consumers, once they buy a vehicle, to 

drive less; and second, it implies that the government can do a better job of weighing the costs and benefits of fuel-saving vehicle technologies than the auto manufacturers and auto consumers who make and use those vehicles. These critics typically 

conclude that the better policy is to tax gasoline, where the tax rate reflects some 

or all of the additional cost to society associated with oil use—for example, the negaVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
47 

tive influence of oil supply disruptions on the economy, domestic and international 

environmental impacts, and highway congestion. 

One response is to agree with the CAFE critics on principle, but note that political 

opposition to gasoline tax increases make them impractical. However, we can also 

take issue with the second criticism and argue that auto manufacturers and consumers are not really making good decisions about fuel economy. Several explanations for this failure stand out. The first is that consumers may not know, understand, or believe differences exist in fuel economy among vehicles. The recent controversy over the inaccuracy of EPA fuel economy ratings on information labels underscores this point. 

Second, even understanding that those differences exist and are real, consumers 

may not rank fuel economy high enough to worry about when shopping for a car. 

Cargo capacity, power, and styling may be more important to consumers. Finally, 

even if consumers consider fuel economy, they may find it does not make a big 

enough difference to sway their choice of vehicle. Typical fuel economy decisions 

might represent an annual net gain per vehicle of about $50–$500, depending on 

the payback period a consumer requires. On a $20,000 new car, this is analogous 

to an option for a fancy radio or improved styling. 

Finally, consumers may not properly account for the full value of future fuel savings from a more fuel-efficient car, considering, for example, only the first few years 

of savings rather than the entire vehicle lifetime. 

If consumers are systematically undervaluing fuel economy, it makes sense that 

vehicle manufacturers are not going to build more fuel-efficient cars. Based on that 

observation—an observation with which I tend to agree—fuel economy standards 

are a sensible policy and Congress should focus on reforming CAFE to make it more 

efficient. 

It is worth noting that one argument that cannot be used to support CAFE is that 

stricter fuel economy standards will substantially lower gasoline prices. Recent estimates by the Energy Information Administration, for example, suggest that a 36 

percent improvement in CAFE (6-7 mpg) would lower gasoline prices by at most 

$0.08 by 2025. More modest CAFE improvements, such as the recent 1.8 mpg increase in light-truck standards, would lower gasoline prices even less (although the 

impact is larger with reforms than without). However, CAFE will lower expenditures 

on gasoline, as the quantity consumed will decline even if the price remains relatively insensitive. More importantly, it will reduce the vulnerability of the economy 

to future oil price shocks by reducing the share of gasoline expenditures in overall 

economic activity. 

Overall Conclusions 

Following on the heels of recent regulatory reforms to the light-truck CAFE program, Congressional action to similarly reform the CAFE program for passenger 

cars—as well as to enact further reforms that were not possible in the light-truck 

rulemaking—has a large potential to improve program efficiency, to make the program more equitable, and to do all of this without sacrificing safety. The light-truck 

rule provides a model for two improvements: differentiating manufacturers’ standards based on their mix of large and small vehicles, and setting the overall level 

of the standards based on an explicit and careful cost-benefit analysis. Further reforms include trading between the passenger car and light-truck fleets, trading 

among manufacturers, unrestricted banking of CAFE credits earned by exceeding 

the standard, and a cost-limiting safety valve. 

It is surprising that the recent final rule for light-truck fuel economy in 2011, 

based on balancing costs and benefits, demonstrated remarkably little sensitivity to 

a 50 percent increase in the value of fuel saving benefits. This surprise, along with 

other concerns about how NHTSA would set the standards, has led to calls for Congress to directly set the standard in statute. Nonetheless, I find the complexity of 

the standard-setting process, as well as the need to regularly revisit the level of the 

standard, to be more suitable for agency rulemaking than Congressional action. 

Congress can instead reform the structure of CAFE to increase efficiency, continue 

to give NHTSA clear guidance on the key costs and benefits it should consider, and 

perhaps require greater transparency with regard to the cost modeling. 

Lastly, critics often argue that CAFE is not the right policy to address petroleum 

use in the transportation sector, because it improperly focuses on creating more 

fuel-efficient vehicles rather than alternatively or additionally encouraging consumers to drive those vehicles less. Such a criticism is based on an assumption that 

consumers and manufacturers will make good decisions about fuel economy based 

on technology and fuel costs. Yet, there are a variety of reasons why this assumption might be false; based on my belief that these reasons have credibility, a CAFE 

program continues to make sense. 

48 

In summary, Congress has a great opportunity to improve the efficiency of an extremely significant program to reduce oil consumption in the United States, namely 

by reforming the fuel economy program for cars and light trucks. Such reforms will 

reduce the costs of achieving a given standard and allow us to pursue greater fuel 

economy without sacrificing safety. In contrast to other policies being promoted to 

address concerns about higher fuel prices and oil dependency, such improvements 

attack the problem directly by reducing both our expenditures on oil and our vulnerability to future price increases. 

I thank you again for the opportunity to appear before this Committee, and I 

would be pleased to answer any questions. 

APPENDIX I—UNDERSTANDING PROPOSED CAFE REFORMS FOR LIGHT TRUCKS

FR DOC. 05–17005 

Summary 

On August 23, 2005, the National Highway Traffic Safety Administration 

(NHTSA) released a Notice of Proposed Rulemaking (NPR) on corporate average fuel 

economy (CAFE) standards for light trucks along with a Preliminary Regulatory Impact Analysis (PRIA) (NPRM: Federal Register 05–17005, vol. 70, no. 167, August 

30). Relative to the existing 2007 standard of 22.2 miles per gallon (mpg), the proposed changes include fuel economy standards of 22.5–23.5 mpg over 2008–2010 

using the current program design. 

More notable, however, are proposed changes to this design. Under the proposed 

changes, each manufacturer would still need to meet a single overall standard for 

their light truck fleet, but that standard would differ across manufacturers based 

on their production of different sized vehicles. Vehicles with different footprints 

(wheelbase times track width) would have different fuel economy targets and a manufacturer’s overall standard would be based on these size-differentiated targets averaged over their specific fleet. During 2008–2010, manufacturers would have a choice 

of complying with either the old (unreformed) or new (reformed) CAFE standards. 

Importantly, the fuel economy standards starting in 2011 would be set explicitly 

to maximize net benefits to society—including fuel savings, safety, security, and environmental concerns. Among other things, this shift implies that those standards 

will rise along with the price of oil. While the proposed 2011 targets assume $25– 

30 per barrel crude oil prices (based on available government forecasts) and are estimated to achieve a 24 mpg fuel economy, we estimate that an additional $20 per 

barrel (in line with recent long run private-sector forecasts) would raise the proposed targets by perhaps 4–5 mpg. 

The proposed reforms also erase the current disparity between passenger automobile and light truck standards, as the smallest light truck category would have 

a target exceeding the current 27.5 mpg for passenger automobiles. This would remove the incentive for automakers to effectively design passenger cars that can be 

categorized as a light truck (by raising the height, making the seats removable, etc.) 

in order to face an easier fuel economy standard. 

From an economic perspective, these reforms represent a remarkable shift toward 

a more efficient regulatory system. Still, potentially valuable, further improvements 

remain—trading of CAFE credits across manufacturers and between passenger cars 

and light trucks, for example. The proposed reforms also fail to address the larger 

economic questions of whether taxes or tradable permits (for gasoline usage) would 

be a better policy than a CAFE performance standard, and whether consumers and 

manufacturers are really making bad fuel economy decisions absent government 

intervention. The latter question could also have significant implications for whether technology costs and fuel economy benefits are correctly valued in the CAFE 

analysis. 

The remainder of this memorandum walks through essential elements of the reform package, provides a quick economic analysis, and summarizes the economist’s 

perspective. 

Unreformed CAFE 

Existing CAFE regulations establish a single mileage standard that must be met, 

on average, for every manufacturer’s light truck fleet. That is, each manufacturer 

takes the fuel economy of each light truck model they produce, and then averages 

those numbers weighted by production volume. That number must be at or above 

the mandated standard. If the manufacturer beats the standard, the manufacturer 

collects CAFE credits that can be used to make up any shortfall in the next three 

years. If the manufacturer misses the standard and does not have any credits, there 

49 

is a penalty equal to $5.50 per 0.1 mpg per vehicle. The penalty is routinely paid 

by European manufacturers but has never been utilized by domestic or Asian manufacturers. 

The level of the standard is set with an eye toward achieving the maximum possible fuel economy, but with considerable deference given to the ability of each manufacturer to meet that standard. In particular, NHTSA has traditionally focused on 

the least capable vehicle manufacturer and tailored the standard to be ‘‘economically 

practicable’’ for that firm. The actual analysis is based on confidential manufacturer 

data and modeling. This approach was used in 2003 to set the 2005–2007 standards. 

Prior to that, Congressional riders prevented any changes to the CAFE levels for 

light trucks since 1996. The standard for passenger cars has remained unchanged 

since 1990. 

One consequence of this approach is that the single standard for light trucks is 

tougher—more expensive—for manufacturers with a full line, including large trucks 

that have lower fuel economy, and easier for manufacturers focused on small trucks 

that typically have higher fuel economy. For example, Honda has consistently beaten the existing light-truck CAFE standard by 4–5 mpg, suggesting it has had no 

effect on their production decisions, while the major domestic manufacturers that 

produce a broader range of trucks have hovered right at the standard, suggesting 

a real impact. 

The current NPR uses this approach to determine unreformed 22.5–23.5 mpg 

standards for 2008–2010. 

Reformed CAFE 

The proposed CAFE reforms involve two major changes. The first is a shift from 

a single standard for all manufacturers to differentiated standards for each manufacturer based on the composition of their fleet. This shift arguably eliminates the 

notion of a least capable manufacturer because standards are tailored to each manufacturer’s vehicle mix. The second is a shift to an explicit cost-benefit analysis based 

on fuel savings and other consequences of gasoline and vehicle usage. While previous standards have utilized cost-benefit analysis as part of the regulatory impact 

analysis after the standard was set, the proposed reforms put the cost-benefit analysis front and center. 

Differentiated Standards 

The NPR proposes differentiating fuel economy standards for light trucks using 

six discrete size categories, but requests comments on the use of both alternative 

attributes and/or more size categories (or even a continuous function). The size of 

a vehicle, or ‘‘footprint,’’ is defined by multiplying the track width (distance between 

tires on the same axle) multiplied by the wheelbase (distance between centerlines 

on each axle). The proposed ranges for each footprint category, according to NHTSA, 

were based on an effort to keep the majority of models in the low end of each range; 

that is, to avoid creating significant opportunities for firms to slightly increase the 

size of a vehicle and have it move into the next higher range with a correspondingly 

lower standard. 

NHTSA then establishes the relative position of targets for each category. That 

is, category 2 is 0.8 mpg lower than category 1; category 3 is 3.4 mpg lower than 

category 2; etc. These relative positions are determined based on the difficulty/cost 

of achieving fuel economy levels in each category. The result is a schedule of fuel 

economy targets for different size categories, but only defined relative to each other. 

Setting the Standards 

The actual standards are determined by moving the absolute level of this schedule 

up or down in order to meet one of two criteria. From 2008–2010, the criterion is 

that the total cost to industry under the reformed regulation should equal the total 

cost to industry under the unreformed regulation, described earlier. From 2011 onward, the criterion is that benefits to society, minus costs, are maximized. Table 1 

summarizes the resulting standards in the NPR. 

With the target for each category in hand, the standard for each manufacturer 

is based on how many trucks the manufacturer produces in each category. Based 

on current projections by NHTSA, that results in the manufacturer-specific standards given in Table 2. Note that manufacturers do not have to meet the target in 

any one category, but underachievement in one category has to be offset by overachievement in another. 

Analysis 

Several questions naturally arise when evaluating the proposed reform package. 

Does it cost more or less than the unreformed policy? Even if the cost is roughly 

the same, is the distribution of costs different across manufacturers? Does it achieve 

50 

more overall fuel economy for a given cost? Are these cost-benefit estimates consistent with other cost-benefit estimates? We briefly examine each question in turn 

based on available data. 

Does Reformed CAFE Cost More? 

There are no direct comparisons of costs under the proposed, cost-benefit approach 

to setting the standard versus costs based on the existing, least-capable manufacturer approach. A footnote in Table 3 highlights this fact—costs are similar in each 

year where both reformed and unreformed CAFE costs are reported by design. 

However, looking at those same cost estimates in Table 3 across years, we do not 

see a dramatic difference moving from 2010 to 2011, when the new metric of maximizing net benefits is applied for the first time, versus moving from 2007 to 2008, 

2008 to 2009, or 2009 to 2010, when the overall cost to industry is set based on 

unreformed CAFE. Costs per vehicle rise by $89 from 2010 to 2011, but they rise 

by $88 from 2008 to 2009. That suggests, at the very least, that any increase in 

costs from the reformed approach is in line with the spending trend for fuel economy 

improvements over time under the unreformed program. 

Is the Distribution of Costs Different Across Manufacturers? 

Unreformed CAFE sets a common standard for all manufacturers, whereas reformed CAFE will set differentiated standards based on each manufacturer’s product line—higher standards for manufacturers specializing in smaller trucks. Other 

things equal, this suggests a shift in costs away from manufacturers of larger trucks 

and toward those which only manufacture smaller light trucks. Table 4 quantifies 

this shift using historical data on CAFE credits: Under both reformed and 

unreformed CAFE, manufacturers can earn credits equal to the amount by which 

their fleet exceeds the standard, expressed in tenths of a mile-per-gallon, per vehicle. These credits can then be used in future years to make up a deficit if they fail 

to meet the standard. 

Based on historic manufacturing data for 2002–2004, Table 4 shows the change 

in manufacturers’ net CAFE credits position under the reformed versus unreformed 

program; positive numbers reflect a better outcome under reformed CAFE. What we 

see is that three manufacturers, Hyundai, Isuzu, and Suzuki, do noticeably worse, 

facing a deficit of perhaps 30 credits per vehicle absent changes. Meanwhile, GM, 

to a lesser extent Ford, and eventually Nissan, all see an improvement of 2–6 credits per vehicle. If we look at the underlying production data available in Tables III– 

3 through III–5 of the PRIA, the three manufacturers who face the greatest deficit 

are the ones whose trucks fall entirely in the smallest two of the six reformed CAFE 

categories. Meanwhile, GM, Ford, and Nissan have the largest share—more than 

one-third—in the largest two categories by 2004 (only 20 percent of DaimlerChrysler 

vehicles fell in those two categories in that year). 

Does Reformed CAFE Achieve More Fuel Economy for a Given Cost? 

Given that the costs of reformed CAFE are similar to the costs of unreformed 

CAFE, the delivered value of the proposed reforms turns on whether benefits are 

higher. Table 5 compares estimates of the fuel economy, gallons saved, and dollar 

benefits under the two programs. For all three metrics, we see reformed CAFE improvements that are 12–15 percent higher in 2008, 19–20 percent higher in 2009, 

and 6–7 percent higher in 2010. No comparison is possible in 2011, because only 

reformed CAFE estimates were provided. 

Are the Cost Estimates Consistent With Other Studies? 

In an effort to benchmark the cost analysis in the NPR and PRIA, we used the 

data contained in the 2001 National Academy of Sciences (NAS) CAFE study to estimate cost curves for fuel economy improvements for different classes of light trucks 

(SUVs, trucks, and minivans). We compare these costs to the benefits from fuel savings in the NPR, ignoring all of the additions and subtractions for various 

externalities the PRIA considers that have a net effect of lowering benefits 2–4 percent (see PRIA Tables VIII–4 through VIII–10). We then estimate the net benefit 

maximizing level of fuel economy. 

Despite the fact that our data is now five years old and that we could not replicate the size-based categories in the NPR, our results suggest a benefit-maximizing 

fuel economy squarely in the range of the 22.6–24.0 mpg levels forecast under the 

proposed rule. However, it is important to highlight that this estimate uses the NPR 

and PRIA oil price forecast of $25–30 from the Annual Energy Outlook 2005. More 

recent private sector forecasts suggest an increase of perhaps $20 per barrel, adding 

an additional $0.50 per gallon to the fuel economy savings and raising our estimate 

of the benefit-maximizing fuel economy by 4–5 mpg. 

51 

Perspective 

From an economist’s perspective, the proposed reforms represent a clear move toward greater efficiency, perhaps even an optimum given current statutory constraints. Moving beyond this constraint, however, the efficiency of the CAFE program could still be improved by allowing trades among manufacturers and between 

cars and trucks. Because the benefit per gallon is now the metric for setting the 

standard, one could also ask whether this value ought to be used to cap the cost 

of any compliance efforts by allowing manufacturers to pay that value (or some multiple) if they miss the standard. One might even want to back up and ask whether 

CAFE itself—that is a performance standard for vehicles rather than fuel taxes or 

emissions trading—is what we really want. Many economists argue that consumers 

and manufacturers already make the desired fuel economy decisions without regulation, excluding concerns over the environment, security, and safety. If so, the fuel 

economy savings and technology cost ought to balance at the margin, suggesting 

they have been incorrectly valued in this analysis. 

Importantly, by raising the target for small trucks above the standard for passenger vehicles the proposed reforms eliminate the incentive to redesign what is essentially a passenger vehicle in order to be classified as a light truck and to face 

a lighter CAFE standard. Under the current program, such redesigns are often cited 

as a significant, adverse, and unintended consequence of the wide gap in standards 

between cars and trucks. 

Finally, our calculations, showing that recent increases in long-run oil prices raise 

the desired fuel economy by 4–5 mpg, highlight the importance of assumptions 

about these prices. While it is unclear what role oil prices played in setting standards under the unreformed program, they drive the standards set by benefit maximization under the reformed program. 

Tables and Figures 

Table 1. Proposed Targets (in mpg) 

Category 1 2 3 4 5 6 

Range of vehicle footprint (sq. ft.) ≤43.0 >43.0–47.0 >47.0–52.0 >52.0–56.5 >56.5–65.0 >65.0 

MY 2008 Targets 26.8 25.6 22.3 22.2 20.7 20.4 

MY 2009 Targets 27.4 26.4 23.5 22.7 21.0 21.0 

MY 2010 Targets 27.8 26.4 24.0 22.9 21.6 20.8 

MY 2011 Targets 28.4 27.1 24.5 23.3 21.9 21.3 

Source: NPR Table 6. 

Table 2. Estimates of Required Fuel Economy Levels (in mpg) 

Manufacturer MY 2008 MY 2009 MY 2010 MY 2011 

BMW 23.8 24.8 25.1 25.7 

Suzuki 26.0 26.7 26.8 27.5 

Volkswagen 22.7 23.9 24.3 24.8 

General Motors 22.2 22.8 23.2 23.7 

Ford 22.4 22.9 23.1 23.6 

DaimlerChrysler 22.8 23.5 23.7 24.2 

Honda 23.1 24.0 24.2 24.8 

Hyundai 24.2 25.9 25.7 26.3 

Nissan 22.1 22.8 23.2 23.7 

Toyota 23.2 24.1 24.5 25.0 

Fuji (Subaru) 24.8 25.6 25.8 26.4 

Porsche 22.3 23.5 24.0 24.5 

Isuzu 22.3 22.9 23.2 23.7 

Source: NPR Table 7. 

52 

Table 3. Incremental Cost per Vehicle 

MY 2008 MY 2009 MY 2010 MY 2011 

Unreformed CAFE in 2008–2010 56 130 185 N/A 

Reformed CAFE in 2008–2011 54* 142* 186* 275 

*By policy design, the proposed mpg levels under Reformed CAFE are set so that the industry-wide costs of 

Reformed CAFE are roughly equal to the industry-wide costs of Unreformed CAFE for MY 2008–2010. 

Source: PRIA Table I. 

Table 4. Effect of Reformed CAFE, Relative to Unreformed CAFE, on Manufacturer’s 

CAFE Credit Position Using Historic Data 

[change in credits per vehicle] 

Manufacturer 

Market 

share 

(2004) 

2002 2003 2004 

BMW 0.01 -4.29 -0.92 -16.23 

DaimlerChrysler 0.19 -3.03 -6.00 -7.25 

Ford 0.23 2.80 -1.00 3.01 

GM 0.29 7.87 6.00 5.63 

Honda 0.06 -3.51 -11.00 -9.91 

Hyundai 0.02 -13.64 -30.05 -27.15 

Isuzu 0.00 -14.32 -29.76 -27.21 

Nissan 0.06 -9.89 -16.02 2.18 

Suzuki 0.00 -16.71 -29.90 -29.40 

Toyota 0.13 -4.50 -5.01 -7.99 

Volkswagen 0.01 -8.53 -15.12 -8.14 

Source: PRIA Tables III–3 through III–5. 

Table 5. Benefit Estimates, Reformed and Unreformed CAFE 

2008 2009 2010 2011 

Fuel economy improvement versus baseline (mpg) 

unreformed 0.26 0.59 0.87 

reformed 0.29 0.71 0.88 1.34 

Gallons saved over vehicle lifetime versus baseline (millions, undiscounted) 

unreformed 826 1860 2715 

reformed 942 2218 2892 4110 

Benefits versus baseline ($millions, net present value at 7 percent over vehicle life for each 

model year) 

unreformed 605 1366 2007 

reformed 694 1633 2144 3069 

Source: PRIA Tables VI–1b, VI–2, VI–3 (Fuel Economy), PRIA Table 5 (Gallons), PRIA Table 3 (Benefits). 

Senator LOTT. Thank you, Congressman. 

And Ms. Joan Claybrook, good to see you again. 

STATEMENT OF JOAN CLAYBROOK, PRESIDENT, 

PUBLIC CITIZEN 

Ms. CLAYBROOK. Thank you so much, Mr. Chairman. It’s a pleasure to be here. 

I’d like to point out that I issued the first, and only, car fuel 

economy standards for this Nation in 1977, setting the final standard in 1985, which was mandated by the Congress in the Energy 

Policy Act of 1975. We set the standard at 27.5—based not on just 

53 

product plans, which is what the current DOT Secretary talks 

about, but product capability. This issue reveals the great deficiency in the way that they have addressed this. You have some 

awesome women on this panel, Mr. Chairman, and they have—— 

Senator LAUTENBERG. Can you move the mike up a little closer? 

Ms. CLAYBROOK. You have some awesome women on this panel, 

Mr. Chairman, and they have dissected this rule already. But I 

would like to add one piece to that, dealing with the sliding scale 

for the light-truck rule, which the Secretary’s asking authority to 

have for the car standards, and that is that it’s left to the discretion of the manufacturer as to how much fuel is going to be saved, 

because it’s a sliding scale. And so, if a manufacturer wants to increase the weight of their vehicle just a little bit more, they will 

have less fuel economy to meet. That is, the whole concept of this 

rule is that the bigger the vehicle—the bigger the footprint of the 

vehicle—the less fuel economy you have to achieve. So, the larger 

they make their vehicles, the less fuel economy they have to 

achieve. So, I believe it’s a mirage about how much fuel savings is 

actually going to occur under that rule. And I would certainly oppose that for the car standards. 

This restructuring that they’re asking for, I think, is a terrible 

mistake. And it’s certainly not needed for cars in the same way 

they’ve tried to justify it for trucks, as there’s so much less differential between the smallest car and the largest passenger car. 

So, you really don’t need it in the same way that you might be able 

to assert that it’s needed for trucks. 

The suggestion that we have is that the Congress set a long-term 

goal. We haven’t given a number, but we would support the bill 

that Senator Snowe has suggested. And we would definitely say 

that you should set a standard for 2008 and 2009 in the statute, 

because the agency is not going to be able to get, as they have said 

today, their rulemaking done by that time. And so, you’re not going 

to have any activity, really, until 2010. 

In response to the fuel economy standards that I set in 1977, because there was a long-term goal of 1985, the auto industry immediately started changing its product plans. In fact, they boasted— 

General Motors boasted that they weren’t going to meet 27 and a 

half, they were going to meet 30 by 1985, at one point. And then, 

when the Administration changed, unfortunately the standard was 

lowered to 26 temporarily. And so, all of that fuel economy advancement left the product planning activity. 

So, we would definitely suggest, for 2008, a 31 mpg—the Secretary said, on average, that they’re now at 30—and 32.5 for 2009. 

In addition, I would just like to address safety for a second. I 

know my time is up, but if I could just take 1 minute to do that. 

The National Academy of Sciences based a conclusion that 2,500 

deaths would be lost with an increase in fuel economy, based on 

a study by the Department of Transportation, authored by a gentleman named Kahane. His study was totally deficient, because it 

made an assumption, a theoretical statistical assumption, that you 

would reduce the weight of every vehicle by 100 pounds. And that 

has never happened nor would it. When the auto manufacturers reduce weight, they take it out of the behemoths. They take it out 

of the great big guys because that’s the most cost-effective and effiVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00057 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
54 

1 Analysis by Therese Langer, Transportation Program Director, American Council for an Energy-Efficient Economy. 2 Ibid. 

cient way for them to do it. It’s what they did in the period between 1975 and 1985. They never reduced the weight of the smaller vehicles. In fact, if you look in the back page of my testimony, 

it shows what’s happened with cars. Cars used to vary from 5,500 

pounds to 2,000 pounds. And after the 1977 standards were issued, 

the fleet homogenized. And today, there are no 2,000-pound cars on 

the highway, and there are no 5,500-pound cars on the highway. 

They’re now between 2,500 and 4,000. So, there is much more homogenization of the size/weight of cars today on the highway. And 

that’s the opposite of what the current DOT did for the light-truck 

standard. They said, ‘‘The bigger it is, the less fuel economy you 

have to meet.’’ So, there isn’t going to be any homogenization of the 

size of these big vehicles. And they don’t even deal with the ones 

over 8,500 pounds. So, you’re going to have these very huge, dangerous vehicles on the highway still hitting smaller vehicles. And 

if there’s one thing that this Committee could do for safety, it 

would be to command the Department of Transportation to issue 

a compatibility standard. Since now they’re going to have these big 

behemoths out there, require them at least to make these vehicles 

compatible when they hit other vehicles, and that would save more 

lives than anything else. 

And it’s a total myth that safety is harmed by improving fuel 

economy. In fact, safety is improved by design. If you design a car 

right, it’s safe. 

Thank you so much, Mr. Chairman. 

[The prepared statement of Ms. Claybrook follows:] 

PREPARED STATEMENT OF JOAN CLAYBROOK, PRESIDENT, PUBLIC CITIZEN

Thank you, Mr. Chairman and members of the Committee, for the opportunity to 

be here today. My name is Joan Claybrook and I am the President of Public Citizen, 

a public interest organization with 130,000 members nationwide. I was the Administrator of the National Highway Traffic Safety Administration (NHTSA) from 1977 

to 1981, and as Administrator, I issued the first fuel economy standards for cars 

and light trucks. In total, I have worked to improve motor vehicle safety and fuel 

economy for more than 40 years. 

The fuel economy standard for passenger cars has not been raised since I issued 

the 27.5 miles-per-gallon (mpg) standard in 1977 under the Energy Policy and Conservation Act (EPCA) of 1975. The standard has not changed since 1990, when it 

was revised back to 27.5 after being lowered in 1986. The current standard is still 

27.5 mpg and was first achieved in 1985 as the law required; more than twenty 

years of lost opportunities to increase fuel economy have been squandered by inaction. If the car standard were an extremely reasonable 35 mpg today, we would save 

approximately 1.1 million barrels of oil each and every day. If the standard was an 

achievable fleet-wide average of 40 mpg, we would save approximately 3.4 million 

barrels of oil a day.1 Over the course of a year, these savings would total approximately 1.24 billion barrels, a quantity almost one-and-a-half times greater than our 

current annual imports from the Persian Gulf. 

Increasing the fuel economy of passenger vehicles would lower gas prices within 

a few years by reducing demand substantially. It would also bolster national security, improve safety, conserve natural resources, reduce pollution and help slow the 

effects of global warming. It is critical that Congress act to ensure an increase in 

fuel economy standards for passenger cars, which account for approximately 25 percent of our total oil consumption.2

I would like to urge Congress to take the following actions to improve car fuel 

economy: 

55 

3See INS v. Chadha, 462 U.S. 919 (1983). 4See 49 U.S.C. § 32902(c)(1). 5See CEI v. NHTSA, 901 F.2d 107 (1990); CEI v. NHTSA, 956 F.2d 312 (1992); CEI v. 

NHTSA, 45 F.3d 481 (1995). 6 U.S. Environmental Protection Agency, ‘‘Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2003,’’ EPA420–R03–006, April 2003. 

1. Congress should clarify whether NHTSA has the authority to raise the fuel 

economy standards for passenger vehicles in the absence of the Congressional 

veto, which the Supreme Court declared unconstitutional in Public Citizen’s 

lawsuit, INS v. Chadha in 1983.3

2. Congress should require an increase in passenger car fuel economy standards. 

3. To assure immediate improvements in fuel savings, Congress should statutorily set the fuel economy standard at 31 mpg for 2008 cars and 32.5 mpg for 

2009 cars and direct NHTSA to set higher standards for later model year passenger vehicles through 2015. 

4. Congress should direct NHTSA to promulgate a single mpg requirement rather than a sliding-scale standard, like the light truck fuel economy standard the 

agency just issued on April 6, 2006. I will make the case that, contrary to arguments otherwise, increases in the single mpg fuel economy standard for cars 

would improve, not harm, safety, and a sliding-scale system for car fuel economy is not needed to ensure fair competition among manufacturers. 

5. Congress should lock in the minimum miles per gallon at 27.5 through a 

backstop measure that increases the minimum miles per gallon as the fuel economy standard is increased. 

One of the hotly debated issues regarding the car fuel economy standard is whether clarification of NHTSA’s authority to increase the standard is needed for the 

agency to act. While some legal experts say that it is not necessary, others say it 

is likely required. To avoid almost-certain litigation over this issue, Congress should 

clarify NHTSA’s legal obligation to raise fuel economy standards for passenger cars 

given the removal of the Congressional veto. 

Such a clarification should also provide a mandate to act. The current law states 

only that the Secretary ‘‘may’’ raise fuel economy standards.4 Any reasonable clarification of this standard would require that the Secretary ‘‘shall’’ raise fuel economy 

standards for cars by a certain date consistent with achievement of the maximum 

feasible average as defined in the current law. This would provide a new mechanism 

for agency accountability should NHTSA fail to act. 

NHTSA agrees that clarification of its authority would be useful. The position of 

NHTSA, as articulated by Department of Transportation (DOT) General Counsel 

Jeffrey Rosen at a hearing by the House of Representatives’ Energy and Commerce 

Committee on May 3, 2006, was that ‘‘the statute had provided the authority subject 

to a legislative veto and that’s why it would be good to clarify’’ it. In its rulemaking 

notices, NHTSA has stated only that it has authority to ‘‘change’’ the standards on 

the right showing of need under the statute. However, the only ‘‘change’’ NHTSA 

has ever made to the 27.5 mpg standard was to lower it in 1986 to 26 mpg, which 

is consistent with the agency’s citation of case law concerning NHTSA’s authority 

to lower the standard under the current statute.5 The standard subsequently returned in 1990 to 27.5 mpg where it has stagnated for the past 16 years. 

Because of the urgent need to address high fuel prices, Congress should also avoid 

needless delay in payoff from increased car fuel economy by statutorily setting the 

standard for model years 2008 and 2009. This would provide the necessary leadtime for rulemaking by allowing NHTSA to set higher standards for later model 

year passenger vehicles. Under the current law, NHTSA must provide 18 months 

of lead time prior to a model year to allow automakers to form or adjust product 

plans. The light truck standard beginning in model year 2008 was just issued by 

NHTSA on April 6, 2006—18 months prior to the start of that model year. If Congress were to act quickly, it would provide virtually 18 months notice for automakers regarding the passenger vehicle standard for model year 2008 and substantially more notice for model year 2009. However, the agency should be encouraged 

to issue future standards with greater lead time to allow companies to meet more 

demanding standards. 

According to data from the Environmental Protection Agency, which files an annual report tracking trends in vehicle fuel economy, automakers experience, on average, fuel efficiency gains of 1.9 mpg in each model year. These are the result of 

innovation and progress in vehicle and technology design and manufacturing.6 In 

56 

7See Juliet Eilperin, ‘‘Resistant Lawmakers Now Back Higher Gas Mileage Standards,’’ Washington Post, May 4, 2006 and Matthew Wald, ‘‘Plan to Reshape Mileage Standards Could Buoy 

Detroit,’’ New York Times, May 7, 2006. 8See Harry Stoffer, ‘‘New CAFE Rules Could Backfire,’’ Automotive News, April 3, 2006. 

the absence of meaningful fuel economy requirements, most of this added efficiency 

in cars and light trucks has been used for bulking up vehicle weight, acceleration 

and torque. 

It has been over twenty years since automakers have been told to use this increase for fuel economy purposes. Last week, the Department of Transportation 

(DOT) admitted that the average car fleet fuel economy today is about 30 mpg, but 

some manufacturers are still below the 1985 standard.7 Many existing cost-effective 

fuel-saving technologies, such as six-speed transmissions, have been allowed to 

molder on the shelf. Based on the existing standard, an increase of 1.9 mpg per year 

consistent with EPA’s calculated fuel efficiency increases would predict achievable 

fuel economy of at least 30.3 mpg in 2008 and 32.2 mpg in 2009. Given the use of 

hybrid and other advanced technologies, manufacturers could easily meet fuel economy standards of 31 mpg for 2008 model year cars and 32.5 mpg for 2009 model 

year cars. Congress should mandate these increases to avoid rulemaking delays 

while allowing NHTSA to set the standard through notice-and-comment rulemaking 

for model year 2010 and later. 

Congress should also specify that the car standard be a single standard rather 

than a sliding-scale system. Congress could do this by adding the phrase ‘‘a single 

standard’’ to the mandate. There is no need for the passenger car standard to incorporate a restructuring of the current system. The agency’s stated concerns about the 

safety effects of down-weighting in response to a single standard are unfounded. Another common argument for a sliding-scale system is that it may help to assure 

there is fair competition among manufacturers. 

This argument was used by NHTSA in support of the new light truck fuel economy standards for model years 2008 through 2011, which is based on a sliding scale 

that requires larger vehicles to comply with less stringent standards. The measure 

used by the agency is vehicle ‘‘footprint,’’ or the space occupied by the vehicle on 

the highway—essentially, the length times the width of the vehicle between tires, 

or wheelbase. This system is intended to insulate full-line manufacturers from a disadvantage in competing with manufacturers that make smaller light trucks and can 

therefore more easily meet fuel economy standards. 

This circumstance does not apply to the car marketplace, as most manufacturers 

now make a full line of vehicles. For instance, using EPA’s four car classes—subcompact, compact, midsize and large—seven of eleven major manufacturers produce 

a large sedan and nine of eleven produce a subcompact. Moreover, relative differences in fuel economy between light and heavy cars are not nearly as great as 

they are between trucks. 

In contrast, any restructured system that creates a sliding scale, such as the recent light truck and SUV fuel economy standards, raises serious concerns that oil 

savings will erode, or even evaporate, over time due to the risk that manufacturers 

will up-size vehicles to qualify for less stringent standards. Figure A, below, examines manufacturers’ product plans, as submitted to NHTSA, for the light truck fleet 

at the time the light truck fuel economy standard was proposed and compares them 

with manufacturers’ plans at the time the final rule was issued. The chart shows 

a significant reduction in the number of vehicles with the smallest footprint classification, or Bin 1 in the chart, and a significant increase in the number of vehicles 

with the largest footprint classification in just the brief period of time between the 

issuance of the advanced notice of proposed rulemaking (ANPRM) on August 30, 

2005, and issuance of the final rule on April 6, 2006. This shows that automakers 

will, as they confessed to Automotive News, alter product plans and the footprint 

of vehicles in response to fuel economy-related incentives from NHTSA.8

57 

* Source: NHTSA, ‘‘Average Fuel Economy Standards for Light Trucks Model Years 2008– 

2011,’’ Federal Register, Vol. 71, No. 66, April 6, 2006, Figures 9 and 10. 

** Bin 1 encompasses vehicles with footprints ranging from 34 to 43 square feet. Bin 2 encompasses vehicles with footprints ranging from 44 to 47 square feet. Bin 3 encompasses vehicles 

with footprints ranging from 48 to 51 square feet. Bin 4 encompasses vehicles with footprints 

ranging from 52 to 56 square feet. Bin 5 encompasses vehicles with footprints ranging from 57 

to 64 square feet. Bin 6 encompasses vehicles with footprints ranging from 65 to 79 square feet. 

Indeed, NHTSA’s recent light truck fuel economy final rule projects only oil savings ‘‘estimates’’ due to the unpredictability of potential changes in manufacturers’ 

future product plans for model years 2008 through 2011. Without a backstop or 

ratchet mechanism that would be triggered when oil savings fail to materialize, a 

sliding-scale passenger car standard would leave the Nation’s level of oil savings at 

the mercy of profit-driven decisions by automakers, which may choose to ‘‘game’’ the 

car standard in the same way they are evidently now responding to the light truck 

rule. The incentive to upsize that comes with a sliding-scale system may also lead 

to larger and more aggressive vehicles, reducing overall safety. 

NHTSA’s rather blithe assurances in this regard cannot be relied upon. While the 

agency claimed that oil savings from the rule would total 10.7 billion gallons over 

the lifetime of model year 2008–2011 vehicles, its public statements failed to note 

that it never modeled the automakers’ likely choices regarding the various options 

available under the rule. Instead, the agency counted oil savings for ‘‘best case’’ compliance scenarios not actually required by the rule. Moreover, the agency’s oil savings estimate of 10.7 billion gallons included gains from changes in automakers’ 

product plans made long before issuance of the agency’s final rule. In sum, the oil 

savings numbers from NHTSA were fictional. 

Congress should include a ‘‘no backsliding’’ measure locking in the minimum 

miles per gallon for the car fleet at 27.5 mpg, or for model years 2008 and 2009, 

the Congressionally-mandated new standard. The measure would require a fleetwide fuel economy average for each manufacturer so that overall fuel economy gains 

are not lost because vehicles qualify for a less stringent based on their footprints. 

A ‘‘no backsliding’’ measure would ensure a base level of oil savings, reducing the 

risk of fleet erosion and incentive for gaming, and remove some manufacturer caprice from the equation. The minimum miles per gallon in the ‘‘no backsliding’’ 

measure should also be increased with each future increase in the fuel economy 

standard for cars. 

Finally, I would like to emphasize that both car and light truck fuel economy can 

be improved without sacrificing safety. A common concern promoted by auto manufacturers is that fuel economy improvements result in down-weighting and thus affect safety. However, the large number of fuel-saving technologies gathering dust on 


clayb1.eps
58 

the shelf means that Congress need not fear any safety risks from vehicle downweighting in response to higher fuel economy standards. 

Historically, manufacturers have relied primarily on fuel-saving technologies, not 

changes in weight, to improve vehicle fuel economy. In fact, after the passenger car 

CAFE standard were issued in 1977, according to the Department of Energy, 85 percent of fuel economy gains came from gas-saving technologies and not from reducing 

vehicle weight. For the other 15 percent, automakers decreased the weight of only 

the heaviest vehicles, as investing in redesign of those vehicles paid the largest dividends in fuel savings. 

For lighter vehicles, the payoff for removing weight is minimal and requires an 

expensive vehicle redesign. It is not, as some have wrongly asserted, cheap to accomplish. Therefore, weight changes are reserved as a fuel economy tool for only the 

heaviest vehicles in a manufacturer’s fleet. 

In addition, since 1985, when the 1977 fuel economy standard fully took effect at 

27.5 mpg, auto companies have vastly increased the weight and engine power of 

automobiles, using fuel-saving technologies not to improve fuel economy, but to offset the increases in vehicle weight and engine power and maintain compliance with 

the 1985 standard. As I mentioned earlier, data from the Environmental Protection 

Agency show that automakers experience, on average, fuel efficiency gains of 1.9 

mpg in each model year. But such gains have been used to make vehicles bigger 

and faster, not to improve fuel economy. Significant fuel economy savings could be 

easily achieved through installation of sensible engines and some accompanying 

down-weighting in the largest and heaviest vehicles. 

In sum, given the current availability of fuel-saving technologies, as in the 1970s, 

any weight changes in response to a more stringent fuel economy standard would 

be concentrated, for economic reasons, in the heaviest part of the car fleet. Reducing 

weight in this segment of the vehicle fleet is both productive for fuel economy and 

beneficial in terms of safety for others on the road. No such reduction occurred. 

NHTSA’s Kahane study, which is the basis for the National Academy of Sciences 

(NAS) study on the relationship between fuel economy and safety, posits a negative 

safety impact as a result of fuel economy increases. The study, however, wrongly 

assumes that fuel economy standards cause an across-the-board reduction in vehicle 

weights of 100 lbs. removed from each vehicle. 

Additionally, the NAS report estimating that CAFE caused thousands of additional deaths in 1993 was wrong. That estimate was hotly disputed in a written dissent by two of the NAS panel members. In Figure B, below, the numbers for 1993 

vehicle weights show that there was no across-the-board reduction by 100 pounds 

of vehicle weight. Instead the impact of CAFE had long been absorbed and the vehicle fleet normalized. 

Even in earlier years, there was no down-weighting of vehicles on the lightest end 

of the vehicle fleet and no explosion of tiny vehicles. For example, between 1976 and 

2003, the market share for heavier new cars weighing 3,000–3,500 lbs. nearly doubled, rising from 15 percent to a 37 percent total market share in 2003. Meanwhile, 

at just over 10 percent in 2003, the market share of lighter new cars weighing 

2,000–2,750 lbs. is half what it was in 1976. The largest cars, weighing more than 

4,000 lbs, all but disappeared and only reappeared in the most recent years. 

Thus, there has been a homogenization of automobiles in terms of weight, which 

the GAO reported in the 1990s is an asset for safety because the behemoths of the 

1970s were a hazard to others on the highway. An across-the-board 100 lbs. reduction in vehicle weight did not happen after the CAFE standards were issued in 

1977, and will not happen in the future for the cost-effectiveness reasons explained 

above. 

59 

Comparing historical fact with Kahane’s 100 lb. assumption demonstrates why 

the NAS’s use of Kahane’s results has produced a widespread and unfortunate misunderstanding concerning safety and fuel economy. 

In addition, the most important factor for safety is good vehicle design. Vehicle 

structure, crashworthiness and interior protections, as well as compatibility with 

other vehicles on the road, are all critical. The most significant step Congress could 

take to increase vehicle compatibility would be to require the agency to issue a compatibility safety standard in upcoming legislation. The 2001 and 2002 models of 

Honda Civics, for instance, have a far lower driver death rate than many much 


clayb2.eps
60 

9Source: Insurance Institute for Highway Safety, ‘‘Risk of Dying in One Vehicle Versus Another,’’ Status Report, Vol. 40, No. 3, March 19, 2005. Available at http://www.iihs.org/news/ 

2005/iihslsrl031505.pdf. 

heavier cars.9 Moreover, longitudinal studies by Clarence Ditlow of the Center for 

Auto Safety, shown below in Figure C, of particular vehicles affected by the 1970s 

CAFE rules show through matched-pairs analysis that vehicles were brought into 

compliance with CAFE rules at the same time that they were made safer. 

In summary, Congress should take the following steps to improve car fuel economy: 

1. Congress should clarify NHTSA’s authority to raise the fuel economy standard for passenger cars with a single corporate average fuel economy by proVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00064 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE

clayb3.eps
61 

viding a mandate to do so consistent with the agency’s obligation to achieve 

maximum feasible fuel economy, as defined in current law. 

2. Congress should require an increase in passenger car fuel economy standards. 

3. Congress should statutorily set the fuel economy standard at 31 mpg for 2008 

cars and 32.5 mpg for 2009 cars and direct NHTSA to set higher standards for 

later model year passenger vehicles through 2015. 

4. Congress should direct NHTSA to promulgate a single mpg requirement rather than a sliding-scale standard. 

5. Congress should lock in the minimum miles per gallon at 27.5 through a 

backstop measure that increases the minimum miles per gallon as the fuel economy standard is increased. 

Congress should also address several other issues critical to improving vehicle fuel 

economy. Congress should provide increased funding to the CAFE program to ensure its effectiveness. The program should receive at minimum $30,000,000—approximately the inflation-adjusted equivalent of the amount of $10 million that the 

CAFE program received to implement the first standards in 1977—and twenty staff 

members. Only with sufficient resources can the agency adequately research and 

support its decisions. 

Congress should also consider eliminating the CAFE credits for production of flexfuel vehicles, which only undermine fuel economy achievements, and instead substitute a mandate for production of flex-fuel vehicles capable of running on ethanol 

and other alternative fuels. And lastly, Congress should revise the statutory definition of passenger and non-passenger vehicles to reflect changes in the vehicle fleet 

since 1975 when EPCA was enacted. SUVs and minivans are currently classified as 

non-passenger vehicles despite their use to primarily transport people. The definitions should be updated to reflect current driving habits. 

As the former Administrator of NHTSA charged with issuing the nation’s first 

fuel economy standards in the 1970s, I urge the Congress to act to improve car fuel 

economy. 

Senator LOTT. Thank you, Ms. Claybrook. 

Mr. Friedman? 

STATEMENT OF DAVID FRIEDMAN, RESEARCH DIRECTOR/ 

SENIOR ENGINEER, CLEAN VEHICLES PROGRAM, UNION OF 

CONCERNED SCIENTISTS 

Mr. FRIEDMAN. Thank you, Mr. Chairman and members of the 

Committee. 

I’m the Research Director for the Union of Concerned Scientists, 

and a Senior Engineer. UCS has been working at the intersection 

of science and policy for over 30 years. And that’s exactly what the 

issues are, facing us today. 

The President could not have been more correct when he told the 

Nation that we are addicted to oil. We import over 60 percent of 

our oil and other petroleum products. Every minute, $500,000 that 

could have been spent creating U.S. jobs and strengthening our 

economy, instead leaves this country to support our import habit. 

The cost of our addiction, however, does not end there. Only the 

entire economies of the United States, China, and Russia exceed 

the global warming pollution resulting from U.S. cars and trucks 

alone. We are already seeing the impacts. Nineteen of the 20 hottest years on record have occurred since 1980. 

One of the reasons for this problem is that the average fuel economy of the fleet of new cars and trucks sold in the United States 

in 2005 was lower than it was in 1985. And while automakers always note the number of models on the market that get more than 

30 miles per gallon on the highway, they fail to mention that most 

62 

are mid-size or compact cars, and that consumers spend most of 

their time driving in congested city conditions. 

The answer to high gas prices, in the long run, our always addiction, and our warming planet is not limiting fuel economy choices, 

as automakers have done, but, rather, giving consumers, who need 

vehicles of all shapes and sizes, safe and high-fuel-economy options. 

There’s a lot of focus on silver-bullet solutions these days, whether 

it’s a new fuel or a new extremely advanced technology that is not 

going to help us for another 20 or 30 years. The answer is not longterm silver bullets. The answer is ‘‘eating right and getting more 

exercise.’’ And that’s what fuel economy can give you. 

[Laughter.] 

Mr. FRIEDMAN. What we have lacking in the showrooms is the 

41-mile-per-gallon family car, the 37-mile-per-gallon minivan, the 

34-mile-per-gallon mid-size SUV, and the 30-mile-per-gallon pickup. These are the vehicles that the National Academies report, requested by Congress, shows are possible with existing technology. 

Together, these vehicles, in a fleet with the makeup of what the 

National Academies studied, would average 37 miles per gallon and 

would save consumers a net of $2,500 over their lives. 

I fear, however, that if left up to the President, consumers are 

not likely to get relief from high gasoline prices. The President’s recent rulemaking on light trucks will save less than 2 weeks’ worth 

of gasoline each year for the next two decades. 

Furthermore, the President’s rulemaking applied to—applied 

size-based standards in a way that will lead to the erosion of even 

this small amount by encouraging automakers to market larger, 

lower fuel economy vehicles, and even allowing them to abandon 

some sectors of the market. 

Congress can ensure that this erosion does not happen by requiring a fleet-wide fuel economy backstop of 37 miles per gallon when 

giving the President the authority to set size-based standards for 

passenger and nonpassenger automobiles. This target is based on 

the guidance requested by, and received from—requested by Congress and received from the National Academy of Sciences, and 

would cut oil dependence by 3.5 million barrels per day. 

I’m sorry, one quick statement. I know my time is up, but I just 

wanted to point out that while the NAS study clearly states that 

fuel economy can be increased with no impact on safety of our cars 

and trucks, critics of fuel economy standards often make claims to 

the contrary. But these claims do not stand the test of the light 

when compared with three recent reports that have come out since 

the National Academy of Sciences study was released. They demonstrate that fuel economy is not linked with increased fatalities. 

Large vehicles do not have lower fatality rates compared to smaller 

vehicles. And increased weight is actually associated with increased fatalities. 

At the end of the day, investing in fuel economy and efficiency 

to cut oil use is the best policy that we can apply to get savings 

over the next two decades. Congress should not defer its regulatory 

authority to the Administration, and it need not, as it can base fuel 

economy targets on the scientific research it requested. Congress 

can be confident that this is technically feasible, cost effective, and 

safe. 

63 

Thank you. 

[The prepared statement of Mr. Friedman follows:] 

PREPARED STATEMENT OF DAVID FRIEDMAN, RESEARCH DIRECTOR/SENIOR ENGINEER, 

CLEAN VEHICLES PROGRAM, UNION OF CONCERNED SCIENTISTS

Thank you, Mr. Chairman and members of the Committee, for the opportunity to 

testify before you today. My name is David Friedman. I am the research director 

and a senior engineer with the Union of Concerned Scientists’ (UCS) Clean Vehicles 

Program. UCS is a nonprofit partnership of scientists and citizens that has been 

working at the intersection of science and policy for over 30 years. 

The President could not have been more correct when he told the Nation that we 

are addicted to oil. Data from the Energy Information Administration indicates that 

we import over sixty percent of our oil and other petroleum products. Last year the 

cost of our oil and petroleum imports was equivalent to almost one-third of the 

United States trade deficit. At today’s oil prices, we are sending more than $500,000 

to other countries every minute just to purchase that oil and other petroleum products. In other words, every minute over one half of a million dollars that could have 

been spent creating U.S. jobs and strengthening our economy leaves this country. 

Forty percent of the oil dependence responsible for this is due to the 220 million 

cars, SUVs, minivans and pickup trucks we drive every day. 

The cost of our addiction, however, does not end there. For each mile our cars, 

SUVs, minivans and pickups drive each year, another pound of global warming pollution (carbon dioxide equivalent) is released from the tailpipe. That means each vehicle produces six tons of global warming pollution from its tailpipe every year and 

the fleet of automobiles produces over 1,300 tons. Including the global warming pollution emitted in making the fuel required for these vehicles, the total impact represents about 1,700 tons of global warming pollution, more than most countries 

produce from their entire economies. Only the entire economies of the United States, 

China, and Russia exceed the global warming pollution resulting from our cars and 

trucks alone. 

Since the time when Model T was first mass-produced, global warming pollution 

from cars and many other sectors throughout the world has increased carbon dioxide levels in the atmosphere to levels higher than the globe has experienced for the 

past 650,000 years. We are already seeing the impacts. Nineteen of the twenty hottest years on record (since 1880) have occurred since 1980. Five of the six hottest 

years have occurred just since 2000. As the problem accelerates, we will be forced 

to rename Glacier National Park as the glaciers disappear and dramatic impacts 

will be felt in lives and economies throughout the country and the world. 

Ending the Addiction 

As long as the United States is tied to oil, American’s pocket books will be susceptible to instability in the Persian Gulf and other regions of the world. Rising oil consumption in China and other developing nations will only make matters worse. And 

as long as the United States is tied to fossil fuels, we will be contributing to many 

significant environmental problems that impact our health and our economy, especially the reality of global warming. 

These facts make the destination clear—in the next fifty years, we must switch 

to clean, renewable fuels to power our cars and trucks—but the reality is that there 

are no silver bullets to tap into overnight. We will continue to be dependent on oil 

as a transportation fuel for decades to come. Yet we have the ability to dramatically 

lessen the addiction. There is reason for optimism if we put policies in place that 

ask both consumers and automakers to take the necessary steps to increase fuel 

economy and reduce travel. Both of these steps will also ensure that renewable fuels 

work in the long run, because if we keep increasing the amount of fuel we use, the 

alternatives will take up too much land, be too expensive, and may just lead to imports of alternatives from countries that are just as unfriendly towards U.S. interests as most oil producers are today. 

Consumers can and must do their part by keeping their tires pumped up, getting 

regular vehicle maintenance, reducing travel through carpooling, taking transit 

when available, walking or biking if it is safe, combining trips, and purchasing the 

highest fuel economy car or truck that meets their needs. But the last step is very 

difficult in today’s market. The average fuel economy of the fleet of new cars and 

trucks sold in the U.S. in 2005 was lower than it was in 1985. Automakers note 

the number of models on the market that get more than 30 miles per gallon on the 

highway, but they fail to mention that most of those are mid-size or compact cars 

and that consumers spend more of their time driving in congested urban conditions. 

64 

The answer to high gas prices, our oil addiction, and our warming planet is not limiting fuel economy choices as automakers have done, but rather giving consumers 

who do need vehicles of all shapes and sizes the safe, high fuel economy options they 

need to be able to find in the showrooms. 

Consumer Choice 

In the past, fuel economy standards have ensured that consumers could have 

higher fuel economy vehicles and not have to give up options. Just as we see today, 

automakers were not ready for the gasoline shortages and the price spikes that occurred in the early 1970s. As a result consumers jumped on the only option they 

had at the time, relatively poorly designed smaller cars. However, as fuel economy 

standards were fully phased in automakers switched from giving consumers poor 

choices to putting technology in all cars and trucks so consumers could have options 

in the showroom with 70 percent higher fuel economy than they had in 1975 (2005 

EPA Fuel Economy Trends Report). 

Today, consumers have vehicles that are larger and faster than they had in 1975, 

but they get higher fuel economy due to Corporate Average Fuel Economy Standards. If the fuel economy of today’s cars and trucks was at the level the fleet experienced in 1975 instead of today’s 25 miles per gallon, we would be using an additional 60 billion gallons of gasoline on top of the 140 billion gallons we will use this 

year. At $2.50 per gallon, that represents $150 billion saved. That number could 

have been much higher, however, if fuel economy standards had not remained essentially unchanged for the past two decades. 

The fact that fuel economy standards have remained stagnant has yet again allowed automakers to set up consumers for a fall. With regular gasoline hovering 

around $3.00 per gallon, consumers have few good choices in the marketplace. Hybrids are now on the market and their sales are growing, but manufacturer production capabilities are very limited and will be slow to grow while the hybrids carry 

a higher price premium. What is lacking from the market is the over 40 mpg family 

car, the 37 mpg minivan, the 34 mpg mid-sized SUV, and the 30 mpg pickup. These 

are the vehicles that the National Academies report, requested by Congress, shows 

are possible with existing technology (Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards, page 38). Together in a fleet of the same 

make-up as the NAS analyzed, these vehicles would average 37 mpg. Over the life 

of these vehicles, consumers would more than pay for the cost of the technologies, 

saving a net of $2,500, essentially paying consumers to help cut our oil dependence 

and global warming pollution. 


fr3.eps
65 

All that is possible without hybrids, diesels, or high-strength materials, as the 

NAS study did not include these in their detailed technology evaluations. In fact, 

as noted in a February 9, 2005 press release from Resources For the Future regarding the former RFF President’s statement before the House Science Committee, 

‘‘[Paul] Portney, Chair of the National Research Council’s Committee on Effectiveness and Impact of CAFE Standards, noted that, upon reflection, the Committee’s 

2001 report may have been too conservative in its fuel economy recommendations 

. . . ‘It might be possible to meet more stringent fuel economy standards at lower 

costs than the Committee foresaw in 2001.’ ’’ 

Union of Concerned Scientists’ analysis of conventional technology, which included 

the NAS technologies as well as high-strength materials, indicates that such a fleet 

could go even farther. Examples of some of these technologies are shown in Figure 

1 at the end of this document. A fleet that put these technologies to work could 

reach 40 mpg over the next ten years while providing the same size, acceleration 

and even improved performance compared to today’s vehicles. Tapping hybrid and 

diesel technology could bring the fleet to more than 50 mpg by 2025. 

Setting Standards and Presidential Authority 

With the NAS study as its foundation, Congress can and should set a fleet-wide 

fuel economy target for all new cars, SUVs, minivans, and pickups at 37 miles per 

gallon within the next ten years. Congress should not defer its regulatory authority 

to the Administration and it need not as it can base such standards on the scientific 

research it requested. Congress can be confident that this is both technically feasible, cost effective, and safe. The engineers, scientists and other experts on the 

NAS CAFE panel noted that, ‘‘. . . it is technically feasible and potentially economical to improve fuel economy without reducing vehicle weight or size, and, therefore, 

without significantly affecting the safety of motor vehicle travel.’’ 

This committee has the opportunity to ensure that savings like these are realized 

in our near future. If Congress does not exercise this authority, consumers are likely 

to receive little relief from high gasoline prices. The president’s recent rulemaking 

on light trucks will save less than two weeks of gasoline each year for the next two 

decades. Such a small amount will not make a significant dent in our oil addiction. 

Furthermore, the president’s rulemaking applied size-based standards in a way that 

will lead to erosion of even this small amount. Improperly designed, size-based 

standards encourage automakers to market larger, lower fuel economy vehicles, and 

allow them to abandon some sectors of the market. In the 1990s we saw the impact 

of improperly designed class-based standards as automakers took advantage of the 

loophole allowing a lower standard for minivans and SUVs despite the fact that they 

are passenger vehicles and should have been included in that category instead of 

with pickups and cargo vans in the non-passenger category established by Congress. 

The result has been a decline in fleet-wide fuel economy from its peak of nearly 26 

mpg in 1987 to 24.6 mpg in 2005 (EPA Fuel Economy Trends Report). 

Congress can ensure that this erosion does not happen again by requiring a fleetwide fuel economy backstop when giving the President the authority to set sizebased standards for passenger and non-passenger automobiles. If Congress does 

only the latter, however, the benefits will be small to non-existent given the Administration’s actions on minivans, SUVs and pick-ups. 

Based on the guidance requested and received from the NAS, Congress should ask 

that the President put in place regulations to ensure that the average fuel economy 

of the fleet of new cars, SUVs, mininvans and pickups sold ten years from now be 

at least 37 miles per gallon. By doing this, Congress would be fulfilling its regulatory role by setting a fleet-wide fuel economy target that will cut oil dependence 

by 3.5 million barrels per day in 2025. In addition, setting a fleet-wide fuel economy 

target within the context of size-based standards would create a backstop that 

would ensure both that the oil savings are realized and that consumers will get the 

choices they will need in a world marked by continuing high and unstable gasoline 

prices and growing impacts of global warming. 

Economic and Jobs Impacts of Setting Fuel Economy Targets 

Contrary to claims by the auto industry, investments in fuel economy technology, 

just like other investments, will lead to prosperity. In order to quantify the benefits 

of actions to increase future fuel economy, UCS estimated the effect of moving existing technologies into cars and trucks over the next 10 years to reach an average 

of 40 miles per gallon (mpg) by 2015. Slowing down the timeline or reducing the 

fuel economy target would reduce the benefits, but for 40 mpg we found that: 

• In 2015, the benefits resulting from investments in fuel economy would lead to 

161,000 more jobs throughout the country, with California, Michigan, New 

York, Florida, Ohio, and Illinois topping the list. 

66 

• In the automotive sector, projected jobs would grow by 40,800 in 2015. 

• For consumers, the cost of the new technology would more than pay for itself, 

saving a net $23 billion in 2015 alone. 

Getting technologies like these into the fleet over the next ten years and then tapping into the growing potential of hybrid cars and trucks could get us to the point 

of saving five to six million barrels of oil per day by 2025 (Figure 2). That would 

be enough of a reduction in oil use to stop the current growth in oil demand and 

hold us where we are today while we wait for the breakthroughs that are needed 

for clean and renewable alternatives to oil. The new jobs would be created both because of investments in new technologies by the automakers and because consumers 

would shift spending away from gasoline to more productive products and services. 

Requiring all automakers to improve fuel economy will increase the health of the 

industry. Companies like Ford and General Motors are currently in junk-bond status due to poor management decisions, not fuel economy standards, which have 

been stagnant for the past two decades. Those poor decisions have put them in a 

place where, just as in the 1970s, they do not have the products consumers need 

at a time of high gasoline prices, and they are continuing the slide in market share 

that began the first time they made this mistake. 

In contrast to automaker claims, it is actually high gasoline prices, not technology 

investment, which will undermine the health of the domestic automobile industry. 

According to a recent study by the University of Michigan and the NRDC, a sustained gasoline price of $2.86 per gallon would lead Detroit’s Big 3 automakers’ profits to shrink by $7 billion as they absorb 75 percent of the lost vehicle sales as consumer budgets are squeezed compared to a scenario with gasoline at $1.96 per gallon. This would put nearly 300,000 people out of work in states like Indiana, Michigan, Ohio, Oklahoma, Texas and Wisconsin. 

By requiring Ford, GM, and all automakers give consumers the choices they need, 

Congress can ensure automaker jobs stay in the U.S. and models like the Ford Explorer and Chevrolet Tahoe are still on the market ten years from now but they will 

go farther on a gallon of gas. 

Safety Impacts of Setting Fuel Economy Targets 

While the NAS study clearly states that fuel economy can be increased with no 

impact on the safety of our cars and trucks, critics of fuel economy standards often 

point to the chapter, which takes a retrospective look at safety. Despite the fact that 

this chapter did not represent a consensus of the committee (a dissenting opinion 

was included in the appendices) and the fact that three major analyses have since 

shown that fuel economy and safety are not inherently linked, claims are still made 

to the contrary. 

First, David Greene (one of the NAS panel members) produced a report with 

Sanjana Ahmad in 2004 (The Effect of Fuel Economy on Automobile Safety: A Reexamination), which demonstrates that fuel economy is not linked with increased fatalities. In fact, the report notes that, ‘‘higher mpg is significantly correlated with 

fewer fatalities.’’ In other words, a thorough analysis of data from 1966 to 2002 indicates that Congress can likely increase fuel economy without harming safety if the 

past is precept. 

Second, Marc Ross and Tom Wenzel produced a report in 2002 (An Analysis of 

Traffic Deaths by Vehicle Type and Model), which demonstrates that large vehicles 

do not have lower fatality rates when compared to smaller vehicles. Ross and 

Wenzel analyzed Federal accident data between 1995 and 1999 and showed that, 

for example, the Honda Civic and VW Jetta both had lower fatality rates for the 

driver than the Ford Explorer, the Dodge Ram, or the Toyota 4Runner. Even the 

largest vehicles, the Chevrolet Tahoe and Suburban had fatality rates that were no 

better than the VW Jetta or the Nissan Maxima. In other words, a well-designed 

compact car can be safer than an SUV or a pickup. Design, rather than weight, is 

the key to safe vehicles. 

Finally, a study by Van Auken and Zellner in 2003 (A Further Assessment of the 

Effects of Vehicle Weight and Size Parameters on Fatality Risk In Model Year 

1985–98 Passenger Cars and 1985–97 Light Trucks) indicates that increased weight 

is associated with increased fatalities, while increased size is associated with decreased fatalities. While this study was not able to bring in the impacts of design 

as well as size, it helped inform NHTSA as they rejected weight-based standards 

in favor of size-based standards based on the vehicle footprint. 

These studies further back up Congress’s ability to set fuel economy targets of 37 

mpg for the fleet in the next ten years without impacting highway safety. 

67 

Conclusions 

Setting a fleet-wide target of 37 mpg in 10 years while giving the President the 

authority to reach that target through size-based standards will save consumers 

money, stimulate the economy, create and protect jobs and preserve the safety of 

our vehicles. All of these benefits will come in addition to cutting our oil dependence 

and emissions of global warming pollutants from our cars and trucks. 

Investing in efficiency to cut oil use, the equivalent of eating right and getting 

more exercise, has been overlooked for the past two decades. Fuel economy technology has gone to double the power of our car engines and increase weight by 25 

percent. Consumers are clearly happy with the size and acceleration of their vehicles today. We don’t have to change that. But consumers are clearly unhappy with 

the cost of high gasoline prices and our economy and our environment cannot sustain the impacts of our oil addiction. 

Congress has the opportunity to ensure that automakers spend the next 20 years 

using technology to curb our oil addiction. It should not be surprising that Congress 

is needed to play this role, the Federal Government has helped drive every major 

transportation revolution this country has seen, whether it was trains, planes, or 

automobiles. The next transition will be no different. 

In addition to setting a fleet-wide fuel economy target of 37 mpg over the next 

10 years, there are several different mechanisms the government could also put to 

work to help reduce oil usage. Among the viable options are: 

• Enforceable, national oil savings targets 

• Performance-based incentives for suppliers and manufacturers to produce higher fuel economy vehicles 

• Eliminating the 60,000 vehicle cap on consumer incentives 

• Incentives to increase alternative fuel production, including production targets, 

research and development, and infrastructure investments 

• Incentives and requirements to increase efficiency of oil usage in the heavy duty 

transportation and industrial sectors 

• Closure of existing loopholes in fuel economy regulations and tax laws 

None of these options is a silver bullet. And some, if not all of them, are politically 

challenging. But by adopting a reasonable package that includes several of these 

measures now, we can reduce the trade deficit and create hundreds of thousands 

of new jobs, while steadily reducing our oil usage. And that’s something I hope we 

can all support. 

Thank you for the opportunity to testify today. I would be happy to answer any 

questions you may have. 

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fr1.eps
69 

Senator LOTT. Thank you, Mr. Friedman. 

Mr. Reuther? 

STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, 

INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE 

AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA 

(UAW) 

Mr. REUTHER. Thank you, Mr. Chairman. 


fr2.eps
70 

The UAW appreciates the opportunity to testify before this Committee on the subject of reforming the CAFE standards. We have 

repeatedly emphasized two important points about the CAFE program. First, we have urged that the structure of the program be 

modified to eliminate discrimination against full-line producers 

based on their product mix. In our view, all companies should be 

required to make similar efforts to improve fuel economy across 

their entire line of vehicles. Second, we have consistently emphasized the importance of retaining both the fleet-wide averaging and 

the two-fleet, the domestic and foreign, components of the passenger car CAFE structure. These two requirements ensure that 

full-line auto manufacturers must maintain small-car production in 

North America. 

As a matter of national energy policy, we believe it is important 

for the U.S. to retain domestic production of smaller, more fuel efficient passenger cars. Furthermore, over 17,000 American workers 

are currently employed in seven U.S. assembly plants that produce 

small passenger cars. Almost 50,000 American workers produce 

parts for these vehicles. The jobs of these workers would be directly 

threatened by any CAFE proposals that undermine fleet-wide averaging and/or the two-fleet rule for passenger cars. 

UAW recognizes that establishing an attribute-based CAFE system for passenger cars similar to the new light-truck system would 

have the benefit of eliminating the current discrimination against 

full-line producers. But it would also have the major down side of 

undermining fleet-wide averaging and the two-fleet rule, and, thus, 

would enable auto manufacturers to offshore all of their small car 

production and jobs. 

Fortunately, the UAW believes there is an easy way to obtain the 

benefits of moving to an attribute-based CAFE system for passenger cars while avoiding the down side of losing our small-car 

production and jobs. Specifically, we urge Congress to impose an 

anti-backsliding requirement on any new CAFE rules that NHTSA 

would be authorized to promulgate for passenger cars. This requirement should specify that both domestic and foreign passenger 

car fleets for each auto manufacturer would still have to meet or 

exceed the CAFE standard under the current system. This antibacksliding benchmark should be increased in line with overall fuel 

economy improvements. The adoption of this type of anti-backsliding requirement would prevent companies from offshoring their 

small-car production and jobs. It would also ensure that the auto 

manufacturers cannot subvert the objective of any new CAFE system by upweighting or upsizing many of their vehicles, resulting in 

worse overall fuel economy. 

In conclusion, we look forward to working with this Committee 

as you consider proposals to improve fuel economy. 

Thank you. 

[The prepared statement of Mr. Reuther follows:] 

PREPARED STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL

UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT

WORKERS OF AMERICA (UAW) 

Mr. Chairman, my name is Alan Reuther. I am the Legislative Director for the 

International Union, United Automobile, Aerospace and Agricultural Implement 

Workers of America (UAW). The UAW appreciates the opportunity to testify before 

71 

this Subcommittee on Reforming Corporate Average Fuel Economy (CAFE) standards. 

The UAW represents 1.1 million active and retired workers across the country, 

many of whom work or receive retirement benefits from auto manufacturers or auto 

parts companies. We were deeply involved in the original enactment of the CAFE 

program, and continue to have a very strong interest in this program because of its 

major impact on automotive production and employment in this country and the 

jobs and benefits of our members. 

The UAW strongly supported the establishment of the CAFE program, and we 

support continuation of this program as an essential mechanism for improving fuel 

economy and reducing our dependence on foreign oil. We have previously stated, 

and continue to believe, that modest increases in the CAFE standards over time are 

technologically and economically feasible. 

However, the UAW has repeatedly emphasized two critically important points 

about the CAFE program. First, we have urged that the structure of the CAFE program be modified to eliminate discrimination against full-line producers based on 

their product mix. In our view, all companies should be required to make similar 

efforts to improve fuel economy across their entire line of vehicles. Because of this, 

we have strongly opposed legislative proposals that would have a discriminatory impact on full-line producers, and therefore jeopardize the jobs and benefits of tens of 

thousands of active and retired workers. 

Second, we have consistently emphasized the importance of retaining both the 

fleet-wide averaging and the two-fleet (domestic and foreign) components of the passenger car CAFE structure. The fleet-wide averaging requirement provides important flexibility to automotive manufacturers, while ensuring that the CAFE standards produce an overall improvement in fuel economy. Furthermore, the combination of fleet-wide averaging and the two-fleet requirement ensures that full-line auto 

manufacturers must maintain small car production in North America. This is because the production of smaller, more fuel efficient vehicles is needed to offset the 

production of larger, less fuel efficient vehicles. 

As a matter of national energy policy, we believe it is vital that the U.S. retain 

domestic production of smaller, more fuel efficient passenger cars. As we have all 

witnessed, sharp increases in gas prices can lead to shifts in consumer demand towards smaller, more fuel efficient vehicles. Unless we retain domestic production of 

such vehicles, consumers interested in this segment of the market could be forced 

to purchase foreign-made vehicles. 

Over 17,000 American workers are currently employed in seven U.S. assembly 

plants that produce small passenger cars. This includes GM, Ford, DCX, Mitsubishi 

and NUMMI plants in Lordstown (Ohio), Wilmington (Delaware), Spring Hill (Tennessee), Wayne (Michigan), Belvidere (Illinois), Bloomington (Illinois) and Fremont 

(California). Almost 50,000 American workers produce parts for these vehicles. The 

jobs of these workers would be directly threatened by any CAFE proposals that undermine fleet-wide averaging and/or the two-fleet rule for passenger cars. In addition, the loss of these jobs would inevitably have a negative ripple effect on the rest 

of the economy. 

NHTSA recently released final rules establishing new CAFE standards for light 

trucks. These rules require modest improvements in light truck fuel economy, and 

also establish a sized-based CAFE system for light trucks. The UAW supported 

these rules for several reasons. We believed the magnitude and timing of the proposed increases in light truck fuel economy were feasible. We were also very pleased 

that the size-based CAFE system eliminated the discriminatory impact on full-line 

producers. At the same time, because the old light truck CAFE standards did not 

contain any two-fleet rule, there was no threat to the continuation of small truck 

production and jobs in the United States. Furthermore, because the new rules only 

dealt with light trucks, not passenger cars, and did not change the definitions of 

what is a ‘‘passenger car’’ and what is a ‘‘light truck,’’ there was no threat to small 

car production and jobs in this country. 

The UAW believes that NHTSA already has the authority to raise the flat MPG 

requirement in the current CAFE standards for passenger cars, and that legislation 

is not needed to enable it to go forward in this manner. However, in his recent letters to Congress, Secretary Mineta made it clear that the Department of Transportation also wants Congress to give NHTSA the authority to change the structure 

of the passenger car CAFE system to an attribute-based system similar to the new 

structure that has been implemented for light trucks. There is general agreement 

among the various stakeholders in the fuel economy issue that NHTSA does not currently have this authority, and that authorizing legislation would be required before 

such structural changes in the passenger car CAFE program could be adopted. 

72 

The UAW recognizes that establishing an attribute-based CAFE system for passenger cars similar to the new light truck system would have the benefit of eliminating the current discrimination against full-line producers. We would strongly applaud this development. 

However, it would also have the major down side of enabling auto manufacturers 

to offshore all of their small car production and jobs. This would happen due to the 

elimination of the two-fleet rule. But even if this rule was retained, the companies 

would still be able to offshore their small car production and jobs due to the shift 

from a uniform, flat MPG fleet-wide requirement for all companies to a pure attribute-based system. 

Some commentators have tried to dismiss concerns about the loss of small car production by arguing that the companies will simply substitute large car production 

at these facilities, leaving the overall production and employment levels unchanged. 

This ignores the harsh reality that there currently is significant over capacity in the 

auto industry. The UAW submits that the real world impact is that certain companies would take advantage of the change in the CAFE rules to further downsize 

their operations. The net result is that small car facilities would be closed, and tens 

of thousands of automotive jobs would be lost, without any compensating replacements with large vehicle production and jobs. 

Fortunately, the UAW believes there is an easy way to obtain the benefits of moving to an attribute-based CAFE system for passenger cars, while avoiding the down 

side of losing our small car production and jobs. Specifically, the UAW urges Congress to impose an ‘‘anti-backsliding’’ requirement on any new CAFE rules that 

NHTSA would be authorized to promulgate for passenger cars. This requirement 

should specify that both the domestic and foreign passenger car fleets for each auto 

manufacturer would still have to meet or exceed the CAFE standard under the current system (i.e. the 27.5 flat MPG fleet-wide standard). This ‘‘anti-backsliding’’ 

benchmark should be increased in line with the overall fuel economy improvements 

required under any attribute-based passenger car CAFE system. 

The adoption of this type of ‘‘anti-backsliding’’ requirement would prevent companies from offshoring all of their small car production and jobs. This would help protect the jobs of tens of thousands of American workers. It would also guarantee that 

we continue to maintain domestic production capacity for smaller, more fuel efficient 

vehicles. 

This type of ‘‘anti-backsliding’’ requirement also would ensure that the auto manufacturers cannot subvert the objective of any new CAFE system by ‘‘up-weighting’’ 

or ‘‘up-sizing’’ many of their vehicles, resulting in worse overall fuel economy. It 

would guarantee that the companies will actually improve fuel economy across the 

entire range of their passenger cars, and that consumers and our Nation will indeed 

receive the benefits of more fuel efficient vehicles. 

The imposition of this type of an ‘‘anti-backsliding’’ requirement would not be burdensome for the auto manufacturers. If the companies are genuinely taking steps 

to improve fuel economy across their entire range of passenger vehicles, and if they 

do not shift small car production overseas, they should easily be able to meet this 

requirement. 

Thus, the UAW would support legislation that authorizes NHTSA to establish an 

attribute-based CAFE system for passenger cars similar to the recently promulgated 

rule for light trucks, provided this is coupled with an ‘‘anti-backsliding’’ requirement 

that protects small car production and jobs in this country and prevents upweighting or up-sizing of cars. If this type of ‘‘anti-backsliding’’ requirement is not 

included, then we would vigorously oppose such legislation. 

In addition to imposing an ‘‘anti-backsliding’’ requirement on any new passenger 

car CAFE rules, the UAW urges Congress to specify that such rules should only 

take effect in 2012 or later, after the new light truck CAFE rules have been implemented. In light of the serious economic difficulties currently facing certain auto 

manufacturers, we believe it is important to avoid placing undue regulatory burdens 

on the industry. The auto companies will have to make significant investments to 

meet the challenges posed by the new light truck CAFE rules. In our judgment, 

these burdens should not be compounded by simultaneously requiring changes in 

passenger car CAFE rules. By delaying the effective date of any new CAFE rules 

for passenger cars, NHTSA can gain the benefit of valuable experience in the implementation of the size-based CAFE system for light trucks. This will also ease the 

financial burdens on the auto manufacturers. 

The UAW recognizes that there are other important issues associated with any 

shift to an attribute-based system of CAFE rules for passenger cars. This includes 

whether this type of a system should be based on weight, size or some combination 

of factors. We believe that resolution of these complex issues can best be resolved 

through the administrative rulemaking process. 

73 

We understand that some persons have also called for the adoption of a ‘‘credit 

trading’’ system that would allow auto manufacturers to buy and sell CAFE credits 

for passenger cars and/or trucks. The UAW strongly opposes such proposals, and 

urges Congress not to give NHTSA any authority to establish this type of a credit 

trading system. A system for trading CAFE credits would inevitably have the effect 

of undermining the two-fleet rule and/or fleet-wide averaging, and would therefore 

jeopardize the continuation of small car production and jobs in the United States. 

It could also aggravate the uneven playing field that currently exists between foreign and domestic auto manufacturers. 

The UAW believes it is important for Congress to recognize that changing the 

CAFE standards for passenger cars, by itself, will not solve either the immediate 

problem of high gas prices or the larger problems of energy security and environmental protection. Because of the long lead time needed to implement any changes 

in CAFE, there clearly will not be any impact whatsoever on current gas prices. 

Furthermore, light duty vehicles (passenger cars and light trucks) only account for 

40 percent of oil demand in 2006. Passenger cars account for less than half of lightduty vehicle sales, and new passenger cars sold each year represent a very small 

percentage of the total vehicle stock on the road. Thus, changing the CAFE standard 

for passenger cars would, over five years, only moderate demand from a source comprising less than 10 percent of our Nation’s oil use. In order to significantly reduce 

our oil usage and our dependence on foreign oil, clearly there is a need for broader 

national energy policies. 

The UAW submits that these critically important energy security objectives do not 

have to be at odds with the goal of protecting and creating jobs for American workers. Indeed, we firmly believe our Nation can make substantial progress in improving fuel economy and reducing our Nation’s dependence on foreign oil, and at the 

same time help make sure that we keep and expand automotive jobs in this country. 

The UAW urges this Subcommittee, the entire Congress and the Bush Administration to support energy initiatives that further both of these important objectives. 

Specifically, we urge Congress and the Bush Administration to move forward with 

proposals to encourage the domestic production of advanced technology vehicles and 

their key components. We believe great strides can be made in improving fuel economy and reducing our dependence on foreign oil by accelerating the introduction of 

such vehicles. But, as was demonstrated by a November 2004 study conducted by 

the Office for the Study of Automotive Transportation (OSAT) of the University of 

Michigan Transportation Research Institute, and commissioned by the bipartisan 

National Commission on Energy Policy, the United States will lose tens of thousands of automotive jobs unless steps are taken to encourage the domestic production of these vehicles and their components. Currently, most of the advanced technology vehicles are assembled overseas, and almost all of the key components for 

the hybrid and diesel vehicles are built overseas. As these vehicles gain a larger 

share of the market, we will inevitably lose automotive jobs unless we make sure 

that these vehicles are assembled in the U.S. and the main components are also 

built here. 

We are very pleased that proposals along these lines have already been introduced by Members on both sides of the aisle, including the Bayh-Lieberman-Brownback-Lugar (S. 2025); Obama (S. 2045); Conrad (S. 2571) and other bills. The UAW 

submits that the types of manufacturer’s incentives in these bills can help to create 

thousands of automotive jobs for American workers, while at the same time improving fuel economy, reducing global warming and our dependence on foreign oil. 

The UAW also urges Congress and the Bush Administration to move forward with 

proposals to aggressively promote the production, sale and use of alternative fuel 

vehicles. Several automakers are already producing vehicles that can run on a blend 

of 85 percent ethanol, 15 percent gas. This technology is relatively inexpensive— 

about $150 per vehicle. But production and sales of flex-fuel vehicles represent only 

a small fraction of the market. And the actual use of alternative fuels has been 

hampered by bottlenecks in processing and, more importantly, the lack of a distribution network. The UAW believes these problems can be overcome by mandating that 

a certain percentage of all vehicles sold in the U.S. by each automaker must be flexfuel capable by a specified date. Indeed, there’s no reason why automakers can’t 

make 100 percent of their vehicles flex-fuel capable within a reasonable time frame. 

We also believe that there should be additional incentives to encourage the creation 

of more processing plants to increase the supply of alternative fuels, and to encourage the conversion of existing filling stations so they have the capability to distribute alternative fuels. In our judgment, this combination of flex fuel policies offers the best opportunity to make progress in the near term on reducing oil consumption and our dependence on foreign oil. 

74 

In conclusion, the UAW looks forward to working with this Subcommittee as you 

consider proposals to improve fuel economy. Thank you for considering our views 

on these important issues. 

Senator LOTT. Well, thank you very much, panel. And we will 

have some time for questions now. I hope you all can stay with us 

another 15 minutes, at least, or so. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. 

Mr. Friedman, you used a ‘‘60 percent dependent on foreign 

sources’’ number. I thought our number was 50 percent. So, if you 

could just tell me where you got that. 

Mr. FRIEDMAN. Well, that’s based on February imports and total 

consumption from the Energy Information Administration. 

Senator CANTWELL. OK. And can you comment on this? My colleague Chairman Lott and I worked on this EPA accuracy-of-labels 

issue. In fact, maybe Ms. Claybrook wants to comment on that, as 

well. But Consumer Reports have been conducting mileage tests for 

years. And what happens is, consumers go out, and they think 

they’re buying a car that is more fuel efficient—for example, EPA 

says that the Chrysler 4-wheel-drive diesel version of the Jeep Liberty gets 22 miles per gallon, and yet, in Consumer Reports, it only 

got 11. The Chevy TrailBlazer was supposed to get 15 miles; it only 

gets 9. And there are various examples of that. So, how do we— 

and we were successful in getting EPA to say that they were going 

to update this test, which hasn’t been updated since, I think, the 

1970s—how do we marry that with CAFE so that we’re getting an 

accurate assessment? 

Mr. FRIEDMAN. Well, right now the way the regulations—the way 

the law is written, the fuel economy standards are based on the 

tests that were used in 1975. And clearly we know those tests do 

not work anymore. Consumers know it. The average acceleration 

on those tests is the equivalent of going from zero to 60 in 18 seconds. So, those tests are clearly broken. And EPA does look to be 

finding ways to fix that for the window stickers. But the way the 

regulations are written, that fix cannot legally be applied to the 

fuel economy standards. That statute would have to change in 

order for the fuel economy standards to also be based on what consumers are actually getting in the marketplace. 

Senator CANTWELL. And I’m assuming you think we should do 

that. 

Mr. FRIEDMAN. Well, it only makes sense for both consumers and 

the Government and automakers to be judging their vehicles based 

on the real fuel economy they get, rather than what’s—incorrect 

tests would produce. Definitely. 

Senator CANTWELL. Ms. Claybrook, did you want to comment on 

that? 

Ms. CLAYBROOK. I completely agree. I think it’s very confusing to 

have two different sets of numbers. And, I think that if you adjusted the standard numbers to reflect reality, without increasing 

them in the course of doing that, so they adjust for the equivalent 

of what they are today, but they’re real numbers, then that 

wouldn’t have any adverse impact, in terms of what the auto manufacturers would be concerned about. And then, from there you 

make your calculations about how much of an increase you could 

75 

get. I know we’re all wedded to the 40 miles per gallon in 10 years, 

and the 27 and a half, we’ll just have to learn again and readjust. 

But I think it should be done. 

Senator CANTWELL. Thank you. 

Mr. Webber, I see your finger poised for the button there, but if 

I could ask you to also comment on your infrastructure comment 

and the fact that we have an infrastructure issue as it relates to 

alternative fuel products. And if you have any recommendations on 

that. 

Mr. WEBBER. First, on labeling, we supported your effort to reform the system. And I’m glad it’s underway. It needs reform. The 

consumer deserves to know. 

Senator CANTWELL. But you—do you—but what about—as—— 

Mr. WEBBER. On infrastructure—— 

Senator CANTWELL. No, creating—the gap between the labeling 

and the fact that it can’t be used for CAFE. Do you support changing that, so that they’re the same? 

Mr. WEBBER. I would like to study that. We haven’t taken a position on that particular aspect of it. 

Senator CANTWELL. OK. 

Mr. WEBBER. But we do know that the present system is somewhat misleading. 

Senator CANTWELL. OK. 

Mr. WEBBER. On infrastructure—and I am focusing now on ethanol, and I’ll just give you some statistics—if we have over 180,000 

gasoline stations out there today, only about 650 will offer you E– 

85 ethanol fuel. We have 5 million vehicles on the road today—we’ll 

have 6 million by the end of the year—that can burn E–85. So, 

that’s a big gap, and that has to be made up. And it’s part of our 

shared responsibility theory, that, in order to get that done, we’re 

going to need a lot of help from the fuel industry, from the government at all levels. That’s got to change. 

Senator CANTWELL. And do you have any specifics there that 

you—that your association supports today? 

Mr. WEBBER. No specifics. We’ve identified the problem. We’ve 

talked, in general terms, about how it might be fixed. I met with 

a group of lieutenant Governors recently, and, when I quoted those 

numbers to them, they said, ‘‘We’ve got to fix it. We think there’s 

a role in it for State government.’’ But we have yet to really get 

down to the basics on it. But it’s a real problem. 

And, in the meantime, our companies—many of our companies 

are moving out rather smartly and producing E–85-capable vehicles. 

Senator CANTWELL. Thank you. 

Mr. Reuther, on that point, on the E–85 vehicles that have already been in the marketplace, and obviously being successfully 

used in other countries like Brazil, what is technically required, 

and how much does that cost, to actually add that ability for cars 

manufactured in the United States to run on either ethanol or on 

fossil fuels? 

Mr. REUTHER. It costs about $150 per vehicle. It’s a very modest 

cost. The technology is known. This is something that’s easily doable. And we feel that moving ahead aggressively with flex-fuel veVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00079 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
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hicles is probably the best short-term thing we could do to save and 

reduce oil consumption. 

Senator CANTWELL. And so, auto manufacturers are ready to go 

on that, or they need—or are you recommending something to help 

that acceleration? 

Mr. REUTHER. Well, the companies are moving ahead with that. 

We would support a mandate, by a date certain, requiring that a 

certain percentage of vehicles sold have to be flex-fuel vehicles, 

since it is a modest cost and since the technology is known. We 

think the bigger challenge is making sure that the distribution network is there, and we would support additional incentives to encourage that to happen. 

Senator CANTWELL. Thank you very much. 

Ms. CLAYBROOK. Could I comment on that, just briefly? 

Senator LOTT. Briefly. 

Ms. CLAYBROOK. Very briefly. 

Right now, in the law there is a credit to the manufacturers to 

encourage them to manufacture the flex-fuel vehicles. And I think 

that maybe that was appropriate initially, but it hasn’t really made 

any difference, in terms of use of alternative fuels or oil savings because of the ethanol distribution system. And it does seem to me 

that a mandate is far preferable to this willy-nilly system of getting 

credits. And, also, the credits undermine the amount of fuel economy that the manufacturers actually produce for each such vehicle. 

Senator LOTT. Senator Lautenberg? 

Senator LAUTENBERG. Thanks very much, Mr. Chairman. This 

has been a very instructive panel, as I heard it, and including discussion with the Secretary of Transportation, before. 

It seems that we’re pretty much at odds with whether you can 

or you can’t. Is it—what is—what would deter Congress from setting a fuel efficiency mark for the industry and saying, ‘‘Meet that 

standard’’? Is there anything in law—I understand what you said, 

Ms. Claybrook, about reforming the whole system—or one of you 

did—but there’s nothing, as I see it, that would prevent the— 

NHTSA from saying, ‘‘Here’s what you’ve got to do.’’ Am I wrong? 

Ms. CLAYBROOK. Well, no, the issue here, and the reason that the 

President came forward, is that under the existing statute it says 

that the agency can set a standard above 27 and a half miles per 

gallon with a Congressional veto. Public Citizen got the Congressional veto overruled in the Supreme Court in 1983. So, there is 

no longer a Congressional veto. The legal question is: ‘‘Is there still 

authority to raise the standards? ’’ 

Our view is that we’re not sure. We don’t know what the Court 

might say. But we think that it would be preferable to have the 

authority vested in the agency, so there wouldn’t be any more lawsuits on this issue, and so that the agency would have authority 

to set higher standards. 

There’s no reason that they couldn’t set a standard out some distance so that the industry has long-term notice, you know, 8 or 10 

years. But I don’t think that the agency’s going to do that. And so, 

that’s the reason that we, and the environmental groups and a 

number of other organizations, favor a longer-term standard that’s 

very reasonable, based on what EPA has predicted is feasible, and 

set a standard so that there’s a goal—— 

77 

Senator LAUTENBERG. Thank you. 

Ms. CLAYBROOK.—that would be achieved. 

Senator LAUTENBERG. Mr. Friedman, does the union support lifting of the tariffs on the imports of ethanol, like the Brazilian formulation, at least until we can supply the—supply it domestically? 

Mr. FRIEDMAN. Well, we currently do not have a position on tariffs relative to ethanol. Part of the reason for that is that the largest impact that we can have over the next 20 years in cutting our 

oil dependence is clearly fuel economy. We did an analysis where 

we looked at what would happen if we put the pedal to the metal 

on both fuel economy and ethanol. And what we found is, over the 

next 20 years, 70 to 80 percent of the reductions in oil dependence 

would come from ‘‘eating right and getting more exercise’’; 20 to 30 

percent would come from ‘‘eating better foods and getting new 

fuel’’—— 

Senator LAUTENBERG. You’re not talking about the weight in the 

car, right? Are you? You say reduce passenger weight, and that’ll 

save us? 

[Laughter.] 

Mr. FRIEDMAN. Exactly. We’re talking about ‘‘eating right and 

getting more exercise,’’ in terms of putting—— 

Senator LAUTENBERG. Right, but—— 

Mr. FRIEDMAN.—the technology that the—— 

Senator LAUTENBERG.—we can’t—— 

Mr. FRIEDMAN.—automakers already have. 

Senator LAUTENBERG.—solve that problem here. 

Mr. FRIEDMAN. Right. 

Senator LAUTENBERG. I, personally, tried that. 

[Laughter.] 

Mr. FRIEDMAN. You should be commended for that. 

[Laughter.] 

Senator LAUTENBERG. Are you concerned that the potential for 

ethanol plants might be built with coal-firing? 

Mr. FRIEDMAN. Well—— 

Senator LAUTENBERG. And could that cancel out some of the benefits that we’d be getting? 

Mr. FRIEDMAN. That’s the tricky thing with silver bullets. There 

are smart ways to do alternatives, there are smart ways to do ethanol, and there are poor ways to do ethanol. Studies show that if 

you base your ethanol production from corn heavily on fossil fuel 

production to make that ethanol, you could actually increase global 

warming pollution and potentially even increase oil dependence. 

But if you make ethanol right, from corn, for example, you could 

cut greenhouse gas emissions by on the order of 10 percent. If you 

make ethanol from grasses, wood chips, other cellulosic products, 

you could actually cut your global warming pollution by 80 percent. 

But it’s all about making sure you do it the right way, not the 

wrong way, which is why we would support regulations that would 

require—if E–85 is going to be on the market, that we need to have 

a growing percentage of that fuel coming from the cleanest sources 

out there. We need performance-based standards for fuels, as well 

as for vehicles. 

Senator LAUTENBERG. Without starting a firestorm here, sitting 

next to my colleague from Arkansas and various other center-counVerDate Nov 24 2008 15:01 Mar 07, 2011 Jkt 064908 PO 00000 Frm 00081 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\64908.TXT SCOM1 PsN: JACKIE
78 

try states, what about—is there a major difference in the efficiency 

of the ethanol that’s produced, as we’re reading a lot about now, 

in Brazil from sugarcane, and that which is grown from corn or 

produced from corn? 

Mr. FRIEDMAN. Well, sugarcane does have some added benefits, 

in terms of global warming pollution. It’s somewhere in between 

corn and switchgrass and other woody products. I think the reality 

here is, we do need to tap into all the alternatives that we can, but 

alternative fuels, while very promising, are still going to take 20, 

30, potentially, depending on the fuel, even 40 years before they’re 

going to have a major impact. We can’t afford to wait that long. 

Fuel economy can actually be a buffer so that we can figure out the 

technologies, so that we can get the best fuels out there for consumers. 

Senator LAUTENBERG. I’m determined to wait until that’s proven. 

Thank you very much. 

Senator LOTT. Thank you very much, Senator Lautenberg. 

Let me ask a couple of questions here, if I could. Mr. Webber, 

do you have a position on including CAFE credits in a future CAFE 

program for passenger cars? 

Mr. WEBBER. Yes, sir. We think that that ought to be studied, 

and not ought to be part of the request, or whatever you decide to 

grant the Administration, in terms of restructuring authority for 

CAFE. On the surface, it looks like an easy solution, but it’s more 

complicated than that. We think, though, it does warrant study. 

And who knows what the future will hold for it? 

Senator LOTT. Well, I think you need to study it, and you need 

to be prepared to take some positions on it as we—— 

Mr. WEBBER. And we will. 

Senator LOTT.—go forward. 

Mr. WEBBER. Yes, sir. 

Senator LOTT. Mr. Reuther, now. I’m sorry, I had to leave the 

room, and I missed part of your testimony, but I want to make sure 

you do advocate, on behalf of your union, that this authority should 

be given to the Secretary, and we should move forward with the 

changes, including the reform. Is that correct? 

Mr. REUTHER. Only if there’s a requirement that they must include an anti-backsliding provision in any new standard. If that is 

not included, then we would oppose giving the authority to the Administration to move forward with an attribute-based system. 

Senator LOTT. All right, sir. 

Mr. Cabaniss, now, your testimony indicates that the two-fleet 

rule may actually have cost jobs in the United States. Do you want 

to make any comment on the two-fleet rule? 

Mr. CABANISS. Yes, sir. The point there is, that the two-fleet rule 

has actually had the unintended consequence of creating disincentives for foreign-based manufacturers to increase the content of the 

vehicles they manufacture here in the United States. And, as I 

mentioned earlier, today we have approximately a 4-million-vehicles-per-year capacity in the United States. We believe there’s 

every incentive—especially with the need to conserve fuel, the need 

to address greenhouse gases, and so on—there’s every reason to believe that we need to have as much production here in the United 

States for all manufacturers for fuel-efficient vehicle options. And 

79 

so, it’s counterproductive to have that kind of disincentive in the 

Act. 

There have even been cases where vehicle content of domestically 

produced vehicles has been reduced in order to deal with this accounting of having vehicles in the import side versus the domestic 

side. And those kinds of de-contenting decisions take away jobs, 

and not only direct jobs, but also have supplier impacts, as well. 

Senator LOTT. Congressman—— 

Mr. SHARP. Mr. Chairman? 

Senator LOTT.—Congressman Sharp, if I could go to you, thank 

you for the time you’ve spent with these outside groups since you 

left the Congress. I’d like to get your view about the CAFE regulation for light trucks. Was this a positive move? Did it work well? 

Is it going to work well, in your opinion? 

Mr. SHARP. Well, first of all, we don’t have—— 

Senator LOTT. It’s been panned a good bit here. 

Mr. SHARP.—real experience with it yet. It’s—— 

Senator LOTT. Yes. 

Mr. SHARP. It hasn’t actually taken effect, in terms of—— 

Senator LOTT. Yes. 

Mr. SHARP.—the choice that the manufacturer makes between 

the old style and the new style. One of our economists at our Resources for the Future, however, did look at it, and I have attached 

to my testimony some of the favorable propositions that he identified about this redesign. It does pattern after a redesign possibility 

that was in the National Academy of Sciences proposal where it 

suggested a weight-based standard phased in a similar way. There 

is one element of the National Academies study that I think it 

would be wise for your staff to go back and look at, and that was 

a design feature that would, in a sense, cap off how bad it could 

get if you allowed this to go to the degree that Joan Claybrook is 

concerned it will. And so, there are some other features that can 

help solve that. 

I think there are a lot of questions out there as to how aggressive 

they, in fact, were in the numbers that they picked. And I think, 

given, especially, the fact that the price of gasoline is up, that one 

might have made a different calculus, and, therefore, come up with 

higher requirements. 

Senator LOTT. Do you think, though, that the approach taken in 

that rule, perhaps with some strengthening, could be applied to 

passenger cars? 

Mr. SHARP. I think that’s possible, but I’m not the expert on that. 

Senator LOTT. OK. Right. Well, just in conclusion, because my 

time’s running out, too, and we’ll want to go to Senator Pryor, I 

want to thank this panel. It’s been a very interesting presentation. 

You know, two or three observations. One, there’s always a desire—well, you can do—should do more, could do more—here’s my 

point. We should have done more. A long time ago, across the 

board, in a whole lot of areas. But that’s no reason why we 

shouldn’t act now. Whatever we might want to do in the future, if 

we don’t get started now, we’re not going to be there. And on 

ANWR, if we had not vetoed it 10 years ago—we would be getting 

oil or gas from ANWR. If we want to get some better fuel efficiency 

80 

standards, let’s start now. It may not be as much as you’d like for 

it to be, but I’d like to think about getting as much as we can. 

I was in a rural State this past weekend, on Sunday afternoon, 

and the road was just jammed with cars. And no trucks. This was 

Sunday afternoon. And I’m thinking, ‘‘What the heck is going on 

here?’’ People are mad about gas prices. And yet, they were all out 

there in their cars, in the rain. It wasn’t Sunday afternoon driving 

to see the scenery in Kentucky. They weren’t going to a ball game. 

It was too early to be going to church. They weren’t taking the kids 

to school. They weren’t going to work. What in the heck were they 

doing? 

So, one of the things I always say in my remarks now, while 

we’re always pointing fingers at each other, whether it’s Republicans or Democrats, Executive Branch, the oil companies, automobile—hey, we’ve met the enemy, and it is us. We, the people. 

And one of the things I think I miss in some of these comments 

here—we’re talking about, OK, look, here’s our view, and here we 

are in the Congress. We’re going to impose our view on the people. 

Somebody better give some thought to what are the people going 

to demand? You’re not going to make the people drive a Mini Cooper. They may choose to drive a big old truck. We can impose our 

judgment, but the American people don’t have to necessarily comply with that. So, I just hope that we keep touch with reality. Can 

we push the envelope? Can we lead the people in a responsible 

way? Hopefully. But I think we’ve got a lot of work to do, in terms 

of bringing the people along to where we maybe need to be in 10 

years. And I don’t think we’ve made much progress there. And 

that’s why I did my column last week, basically saying, ‘‘Hey folks, 

you can’t have cheap gas, big hog automobiles, and not want a refinery in your neighborhood, don’t want any more nuclear plants, 

don’t want hydro plants. You don’t want anything. You just want 

cheap gas. You can’t have it all, all three of those simultaneously.’’ 

So, we’ve got to start making some choices here. Of course, I prefer 

the latter option. I want more refineries. I want LNG plants. I 

want more hydro plants. I want nuclear plants. I want more production. Now, my concession to those with a different point of view 

is, ‘‘Hey, I think we ought to have conservation. I think we ought 

to have alternative fuels. I think we need to look for all kinds of 

options.’’ And so, I want the whole package. I don’t think it’s all 

production or all conservation. I don’t think CAFE’s going to solve 

all the problems of the world, but, let’s do it all, in a responsible 

way. 

Now, those words, ‘‘responsible way,’’ is the kicker. It’s in the eye 

of the beholder. And I think we need to try to look for that sweet 

spot. And we haven’t found it for 30 years. But the chickens are 

going to come home to roost on all of us. And if we don’t find some 

answers soon, I dread the thought of what’s going to happen. 

Thanks for allowing me to make a speech here. 

Senator Pryor? 

Senator CANTWELL. Mr. Chairman, what kind of car was that, 

that the American people don’t want to drive? 

Senator LOTT. A Mini Cooper—which, by the way, I have one. 

[Laughter.] 

81 

Senator LAUTENBERG. Mr. Chairman, could it have been the Kentucky Derby that people were coming home from after—— 

Senator LOTT. Actually, my son and grandchildren live in Kentucky, so—was there—what event was that? 

[Laughter.] 

Senator PRYOR. Thank you, Mr. Chairman. 

Mr. Reuther, let me start with you, if I may. And you said something a few moments ago that was intriguing, and that is your 

‘‘anti-backsliding requirement.’’ Could you explain that a little further to the Committee? 

Mr. REUTHER. We think that if there is going to be a shift to a 

size-based system for cars, there should be a requirement that the 

foreign and domestic fleets of each company cannot slip back below 

what the current standard is. There would be two benefits to that. 

It would guard against the companies generally upweighting or 

upsizing all of their vehicles, and, as a result, they would wind up 

with worse overall fuel economy. From our perspective, the other 

key benefit would be it would prevent the full-line auto manufacturers from offshoring all of their small car production, which 

would have a huge negative jobs impact on this country. 

And I would disagree with the statements that were made earlier 

about how that would actually add jobs. The major impact of getting rid of the two-fleet rule would be that we would see the loss 

of small car production in this country. 

Senator PRYOR. OK, thank you. 

Mr. Friedman, let me ask you about the idea of an anti-backsliding provision. Do you like that concept? 

Mr. FRIEDMAN. Well, I think if you’re going to put in place sizebased standards, you have to have an anti-backsliding system. In 

fact, what you should really do—— 

Senator PRYOR. And, by the way, as I understand it, you do not 

like size-based. 

Mr. FRIEDMAN. A size-based system can work if you have an 

overall fleet-wide target, which would take the form of something 

like an anti-backsliding system. I think we shouldn’t look to the 

past, of where we have been. I think we should look to the future, 

on where we can go with technology, and set that anti-backsliding 

level, that fleet-wide goal, at a level that we could reach in the future. If you do that, then Ford, GM, all the automakers can give 

consumers the choices they need, but Congress will be ensuring 

that in the end we save the oil that we have to save if we’re going 

to reduce the impact of our oil addiction. 

Senator PRYOR. Ms. Claybrook, do you have any views on the 

anti-backsliding provision? I know you had some reservations about 

the size-based, as well. 

Ms. CLAYBROOK. Well, we think that if you’re going to restructure the system, which we see no reason to do for the car fleet, that 

it’s absolutely essential to have an anti-backsliding requirement. 

And one of the key questions is what’s that going to be. 

Senator PRYOR. Right. 

Ms. CLAYBROOK. So, that’s another issue, that adds yet another 

complexity to it. I think that restructuring with a sliding scale and 

the addition of an anti-backsliding requirement is complex and unnecessary for cars. 

82 

Senator PRYOR. OK, thank you. 

Mr. Webber, let me ask you a question. Secretary Mineta, earlier 

in this hearing, talked about one of the factors they look at as they 

have set standards in the light-truck world is the impact on manufacturers. But it seems to me that if you look at the Big Three— 

the so-called Big Three U.S. automakers, they’ve been losing market share fairly steadily over the last two or three decades. And it 

seems to me that one of the things that the American consumer 

looks at when they’re purchasing a new vehicle is the gas mileage 

of the vehicle. And so, I would think that if we did have more stringent fuel efficiency and fuel economy requirements in the U.S., it 

might actually help the Big Three automakers. Do you have any 

comments on that? 

Mr. WEBBER. I do, Senator. And let me just say that, as I look 

at this list of alternative fuel autos on sale today, the Big Three 

is well represented. As I look at the very serious commitment the 

old Big Three have made to research and development, it is, indeed, very impressive. In fact, the automobile industry, generally, 

spends more money, almost $15 billion a year, in research and development and this is more than the pharmaceutical industry 

spends. And so, we’re Number 1 in this country when it comes to 

R&D spending. And most of it is going to advanced technology vehicles. 

What are these advanced technology vehicles achieving? Better 

mileage and lower emissions. All you have to do is look at the 

dozen models of hybrids, many of which are manufactured by the 

Big Three, and you can see the results. The same goes with diesels 

and biodiesels and ethanol, and even natural gas. I think it’s advanced technology and alternative fuels. To me, that’s the twofold 

answer to the crisis we’re in today, if, indeed, it really is a crisis, 

as Secretary Bodman insists. As I said earlier, CAFE is a long-term 

proposition. The gentleman from the Union of Concerned Scientists 

feels that advanced technology is a long way off. That is not true. 

It’s here. 

Senator PRYOR. Mr. Webber, let me ask one final question. This 

is really, I guess, for Mr. Webber and Mr. Friedman. And that is 

an issue that’s very important to this Committee, certainly very 

important to me, and that’s safety. We don’t want to sacrifice safety. But we do know that the NAS, for example, examined safety 

when they looked at CAFE standards, et cetera, and all the ramifications that they may have for the consumer. As I understand 

what the NAS said, they said that the fuel economy in new vehicles, especially in SUVs and trucks, could be raised by as much as 

8 to 11 miles per gallon. It would be more expensive, apparently, 

per vehicle, but that cost would be offset over time through economy in fuel prices. In addition, there would be no, or very little, 

change in the vehicle’s size or performance, and there might even 

be a slight increase in weight. And so, I heard the Secretary earlier 

talking about that again, that being one of the factors that they 

look at, of safety. But it seems to me that based on the NAS study 

and other things that I’m aware of—it seems to me that you can 

make cars more energy efficient and not lose anything on the safety front. Could I have your comments on that? And then Mr. Friedman, as well? 

83 

Mr. Webber? 

Mr. WEBBER. I’ll defer to Mr. Friedman. 

Senator PRYOR. OK. 

Mr. WEBBER. First. And I’ll—then I’ll—— 

Senator PRYOR. OK, great. 

[Laughter.] 

Senator PRYOR. You want to close on that, OK. 

Mr. FRIEDMAN. Well, you can—you’re speaking exactly what the 

National Academy findings say. And, in fact, reading from the report, it says, ‘‘Cost-efficient fuel-economy increases occur without 

degradation of safety. In fact, they should provide enhanced levels 

of occupant protection, because both the increased level of safety 

technology and the increased weight of that technology.’’ 

Senator PRYOR. And you agree with that. 

Mr. FRIEDMAN. It is clear that the technology is out there to increase fuel economy with either having no impact on safety or making vehicles significantly safer. When you look back to 1988–1989, 

by that point, on the order of 80 percent of the improvements in 

fuel economy were due to technologies that had no impact on safety. The only way we’re going to have safety problems is if the auto 

industry does not put safe vehicles out there. This is the auto industry who fought seatbelts, who fought airbags. They don’t have 

a lot of credibility on safety. And that’s why the Government has 

had to require them to put—whether it’s safety technology or fueleconomy technology into those vehicles. That’s the only way we’re 

going to move forward safely and efficiently. 

Senator PRYOR. Mr. Webber? 

Mr. WEBBER. Glad I deferred. I am happy to have the last word. 

Our vehicles, as I said earlier in my testimony, have never been 

safer. Safety is a competitive issue. We’re doing things that are not 

required of us. Many of these things are standard safety issues, or, 

I should say, features that are standard on automobiles and trucks 

today. Some are options. But they have never been safer. 

The other point I would make is that safety has to be a consideration when you’re addressing CAFE. I think NHTSA, generally 

speaking, has done a fairly good job in considering safety issues 

over the years. But I do want to quote from the Wall Street Journal 

editorial. This is today’s editorial. I hesitate to use the caption, but 

it—they did say ‘‘Not so Grand CAFE.’’ You can draw your own 

conclusions on that. But they do address the safety issue. And here 

is the quote, ‘‘The National Academy of Sciences once focused on 

the impact of CAFE standards in a single year, 1993, and estimated that they resulted in as many as 2,600 additional deaths. 

Average car and light-truck weight rose a bit in the 1990s, and in 

2002 the Academy wrote that this increase, though detrimental to 

fuel economy, had saved lives in return.’’ 

So, there is a tradeoff. There is always a tradeoff. We have to 

take those tradeoffs into consideration as we address CAFE. And 

NHTSA is mandated to do that. 

Senator LOTT. Yes. And I think they should. Another personal 

point of reference. My son and my son-in-law, thank goodness, both 

bought recent new vehicles, and the primary, if not the only consideration, was safety, carrying my four grandchildren. Now, unfortunately—or fortunately—they picked vehicles that were highly safe 

84 

in their ratings, but did not get very good fuel efficiency. Not that 

they’re necessarily, you know, not compatible. But clearly, safety is 

a big issue with the buying public, more so than the fuel efficiency. 

I believe, Senator Cantwell, you had one follow-up question? 

Senator CANTWELL. Yes. But, on that subject, I just want to point 

out, I think that some of the analysis in studies—because there are 

others that show that they’re—in fact, Dynamic Research Institute 

showed that there was no impact on safety with decreasing the 

weight across a fleet, but there are issues of whether airbags were 

used appropriately in those studies. So, I think we should get the 

information on that so that we can compare accurate assessments. 

I think it’s great that many of these vehicles now not just have one 

or two airbags, but sometimes as many as six airbags in the car. 

But I wanted to ask Mr. Reuther about just the—Mr. Friedman 

was talking about the nature of change, and, obviously, the length 

of time for that change. And one of the things that’s been impressive about what other countries have done with American cars is 

that they have successfully accelerated this transition to alternative fuels. How quickly do you think that we could get to the 

point of producing over a major of percent of U.S. cars in the 

United States with that flex-fuel capability? 

Mr. REUTHER. I don’t have an exact year for you, but, you know, 

we think over the next decade it’s easily achievable to make our 

auto fleets flex-fuel capable. At the same time, we think we should 

be moving forward aggressively in expanding the introduction of 

advanced technologies—the hybrids, the advanced diesels—and 

making sure that the vehicles and the components are built in this 

country. And we would like to see Government become more of a 

partner in encouraging that acceleration. 

Senator CANTWELL. But you think within a 10-year period of 

time, we could get to over 50 percent? Is that what you were—— 

Mr. REUTHER. Certainly. Yes. 

Senator CANTWELL. Thank you. 

Well, Mr. Chairman, thank you for conducting this hearing. And, 

given your remarks earlier, I certainly believe that we need to look 

forward, and we need to look forward in the most expeditious fashion. I think this country is just one hurricane or one international 

incident away from really having our economy greatly impacted by 

this. And so, as quickly as we can consider legislation and get it 

moved through the Senate and to the House and on to the President’s desk, the better. So, I thank you for conducting this hearing. 

Senator LOTT. Thank you, Senator Cantwell and Senator Pryor 

and to our panel. It was a very interesting panel this morning. 

Thank you for your time. 

This hearing is adjourned. 

[Whereupon, at 12:35 p.m., the hearing was adjourned.] 

(85) 

A P P E N D I X 

PREPARED STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII

It is unfortunate that it has taken record high gas prices to prompt interest in 

new corporate average fuel economy (CAFE) standards. Nonetheless, I am pleased 

that we are moving forward on this issue. 

This Committee can state with great pride that it helped to establish the nation’s 

first CAFE standards in 1975, following the oil crisis of the early 1970s. The standards were largely credited with decreasing the nation’s oil demand in the 1980s, but 

they have not been updated since. Thirty years later, it is time to do more, and this 

Committee must take the lead. 

We know from experience that CAFE works. A National Academy of Sciences 

study demonstrated that CAFE standards achieved a 75 percent increase in fuel efficiency over the time period they were implemented, improved efficiency without 

affecting vehicle performance, and did both affordably. These improvements resulted 

in billions of gallons of oil saved, and relief at the pump for all Americans. 

We also know from experience that our Nation’s insatiable demand for oil is one 

of our greatest economic vulnerabilities, but we have the capacity to do something 

about it. New CAFE standards are one of the most immediate and effective steps 

we can take to remedy our dependence on oil. Technology that would double our fuel 

efficiency is already available; automakers just need to adopt it. That step alone 

would reduce our national oil dependence and reduce fuel costs for every American. 

While I am encouraged by Ford Motor Company’s recent, concerted emphasis on 

flexible fuel vehicles and hybrid technology, I would like to see our automobile industry, as a whole, take a more aggressive leadership role in addressing fuel economy. We do not expect any of these companies to put themselves out of business, 

but we do expect them to be innovators and leaders in the effort to help create a 

sustainable and profitable energy future for our country. 

I would like to see this Committee update the CAFE standards in a way that better reflects the times in which we live. These standards can have a profound impact 

on our oil demand, and given that they are squarely in this Committee’s jurisdiction, I believe we have a responsibility to advance them. I know that many Members 

on this Committee are deeply interested in this subject, and I would like to work 

with each of you as we advance a proposal in the weeks to come. 

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